GameStop stock (GME) crashed this 16% in premarket trading after the company missed third-quarter sales estimates and reported it’s intention to sell up to $100 million in stock underwritten by Jefferies Financial Group Inc. It is likely to more red today.
The Two Reasons for the Drop of GameStock Stock GME
Sales Estimates Missed: The company sales fell 30% to $1 billion for the end of October which was a big miss by market analysts who had had predicted $1.09 billion. GameStop blamed its weakness due to the lockdowns and closed nearly 700 stores. Although this may look ugly, it is a rather common theme today due to Covid-19. The company is aggressively cutting costs to stop the flow of red ink with a reported loss of $0.53 compared to $0.85 that the market had estimated.
The Stock Sale: The stock sale is the primary bear driver. This is causing a very strong BEAR trend because the GME is actually driving down it’s share price by selling shares. The worse thing to be doing right now is driving the price of it’s own stock.
Is GameStock (GME) A Buy?
Investors right now are wondering if the the blood in the streets cause by GameStop make the stock a good buy. The short answer is Yes if you are willing to take on the exposure to Covid-19 lockdowns and know it is a risky trade. The mass selling of the company stock is the primary BEAR driver. GME could be good stock to buy once it hits a point of correction which is unclear at this time but could be as low as $10. There appears to be some near term support at 12, but GME was trading at $5 August.
