GameStop bounces back to recoup losses despite lack of guidance: should you buy or sell?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 9, 2021
  • GameStop shares plunged more than 10% on Thursday morning before recouping losses later in the day.
  • The stock had swung back into a slight intraday loss of about 0.11% as of this writing.
  • The company reported its most recent quarterly results Wednesday after markets closed.

On Thursday, GameStop Corp (NYSE:GME) shares plummeted more than 10% in the morning before recouping losses later for a net intraday loss of about 0.11%. The company reported its most recent quarterly results Wednesday after markets closed missing analyst expectations on earnings.

GameStop posted Q2 non-GAAP earnings per share of -$0.76, missing the consensus Street estimate of -$0.67. Its GAAP EPS of -$0.85 also came short of the average analyst estimate of -$0.66. On the other hand, revenue for the quarter soared 25.3% year-over-year to $1.18 billion, $60 million better than analyst expectations. 

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Thursday’s sharp swing into losses and recovery demonstrates GameStop’s performance this year. The stock has been one of the most volatile in the market after becoming one of meme stock traders’ favourite picks.

So should you buy or sell GME shares in September 2021?

From a valuation perspective, GameStop shares trade at a reasonable price-sales ratio of 2.81. Therefore, with analysts expecting its earnings per share to grow by 37.80% this year before spiking by 94.60% next year, it could be a good time to invest in the company.

Moreover, the gaming industry appears to be one of the most exciting places to invest amid the rising popularity of iGaming in North America. Therefore, with GameStop among the leading players in iGaming, E-Sports, and digital entertainment markets, it seems well-poised to benefit from the industry growth. 

Source – TradingView

GameStop’s volatility creates several opportunities to invest

Technically, GameStop seems like a highly volatile stock. As a result, investors have multiple opportunities to buy or sell the stock as the price continues to swing up and down.

Thursday’s pullback prevented the GME stock from crossing to overbought conditions of the 14-day RSI, thereby creating an opportunity to buy. 

Therefore, investors can target extended rebound profits at approximately $224.41 or higher at $251.38. On the other hand, if the stock price pulls back following Thursday’s late rebound, it could find support at $174.39 and $145.70.

Bottom line: GameStop’s latest rebound seems poised to continue

In summary, although GameStop shares bounded back later in the day to recoup the early morning losses, the stock is yet to hit overbought conditions of the 14-day RSI. Moreover, analysts expect earnings per share to grow substantially this year and next year, making it a compelling option for growth investors. 

As a result, it may not be too late to capitalize on GameStop’s current upward swing.

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