GameStop: More than a Meme Stock (Cash-Rich)

Zacks

GameStop: The Rise of the Retail Investor

Legendary early 20th-century investor Jesse Livermore once remarked:

“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

Though I largely agree with Livermore from a market psychology perspective, what occurred in 2020 with the meme stock craze was genuinely unique. The COVID-19 pandemic and “stay at home” policies sparked a new generation of retail investors. These retail investors took to message boards on Reddit (RDDT) to coalesce and orchestrate one of the largest short squeezes of all time in beaten-down video game retailer GameStop (GME).

Parlaying Meme Status into a Massive Cash Hoard

Despite deteriorating fundamentals in the underlying company, retail investors that piled into the stock forced large, intuitional, fundamental-focused investors to cover their shares. Meanwhile, retail investors continued to pile into GME and other meme stocks like AMC (AMC) and Virgin Galactic (SPCE) with their fresh stimulus checks. Eventually, shares tumbled from a high of $121 in 2021 to ~$10. Usually, the story of a “pump and dump” would end there. However, what is different about this story is that GME management was wise enough to conduct multiple stock offerings at nosebleed prices. Meanwhile, another short-squeeze in 2024 would allow management to unload shares at high prices again. Thanks to GME management’s savvy decision making, the company enjoys a balance sheet that boasts more than $4 billion in cash.

With its new cash stack, GME can leverage it into real-world improvements in the business and pay off debt, make strategic investments, or acquire new businesses.

Short Interest and Technical View

Roughly 9% of GME shares are sold short. Meanwhile, the stock is breaking out of a monthly bull flag pattern. The combination of a large cash hoard, technical breakout, and high-short interest is a recipe for a run into year-end.

Image Source: TradingView

Earnings are a Catalyst

GameStop will report earnings on December 4th. Last quarter, the company swung to profitability, and over the past four quarters, GME has delivered an average surprise of 67% above Zacks Consensus Estimates.

While a return to profitability is bullish, GME earnings themselves are unlikely to boost the stock. That said, what management says in the conference call about its massive cash hoard is likely to move shares and may end up being a significant catalyst to spark a short squeeze.

Bottom Line

The meme craze sent GameStop soaring. While shares have come down, management parlayed the hype and built a cash-rich balance sheet that can be leveraged moving forward.

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Insider Activity Spotlight: Wednesday's Top Buys and Sells Revealed

Investing.com

This article summarizes the most significant insider buys and sells for US stocks from Wednesday, November 13, 2024.

Top Insider Buys:

• Oscar Health Inc. (NYSE:OSCR) saw substantial insider buying activity. Joshua Kushner, co-founder and Vice Chairman, acquired 1,055,478 shares of Class A common stock over three consecutive days, from November 11 to 13. The shares were purchased at prices ranging from $13.5779 to $13.7369, totaling approximately $14.4 million. These acquisitions were made through Thrive Capital Partners (WA:CPAP) VII Growth, L.P. and Claremount VII Associates, L.P., entities over which Kushner has voting and investment control.

• Lemonade, Inc. (NYSE:LMND) director Maria Angelidis-Smith purchased 33,554 shares on November 8 and 13, amounting to approximately $1,007,444. The shares were bought at prices ranging from $27.42 to $33.23 per share through the Smith Family Trust, where Angelidis-Smith serves as a co-trustee with voting and dispositive control over the shares.

• Lantronix Inc. (NASDAQ:LTRX) President and CEO Saleel Awsare acquired 80,000 shares of common stock on November 13. The shares were purchased at a weighted average price of $2.662, with individual trades executed at prices ranging from $2.63 to $2.68, totaling approximately $212,960. Following this acquisition, Awsare now directly owns 233,184 shares of Lantronix.

• Centene Corp's (NYSE:NYSE:CNC) Chief Financial Officer, Asher Andrew Lynn, bought 17,200 shares at an average price of $58.14 per share on November 13. The total transaction amounted to approximately $1,000,008. Lynn now holds a total of 486,847.48 shares, including previously granted restricted and performance stock units subject to vesting requirements.

Top Insider Sells:

• Vertex (NASDAQ:VRTX), Inc. (NASDAQ:VERX) saw a major stock sale by significant shareholder Jeffrey Westphal. On November 11, Westphal sold 2,485,000 shares of Class A common stock at $48.90 per share, totaling approximately $121.5 million. Westphal also converted 2,485,000 shares of Class B common stock into Class A common stock.

• Reddit, Inc. (NASDAQ:RDDT) experienced significant selling activity from Tencent Holdings Ltd (F:NNND) (HKG:0700). From November 11 to 13, Tencent sold shares totaling approximately $197.6 million at prices ranging from $126.35 to $138.5 per share through its subsidiary Tencent Cloud Europe B.V.

• APi Group Corp (NYSE:APG) director Ian G.H. Ashken sold 146,132 shares over November 11 and 12, totaling approximately $5.38 million. The shares were sold at prices ranging from $36.70 to $37.05 per share as part of a Rule 10b5-1 trading plan.

• Lithia Motors Inc (NYSE:NYSE:LAD) CEO Bryan DeBoer sold 15,846 shares on November 11 at prices ranging from $385.7253 to $387.0 per share, amounting to approximately $6.1 million.

• Coupang, Inc. (NYSE:CPNG) CEO and Chairman Kim Bom sold 15 million shares of Class A common stock at $22.97 each, totaling approximately $344.55 million. This sale was part of a pre-arranged trading plan adopted on August 12, 2024.

Investors should stay informed about insider buying and selling activities as they can provide valuable insights into a company's internal perspective. While these transactions alone should not be the sole basis for investment decisions, they can be an important factor to consider alongside other financial and market information when evaluating potential investment opportunities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Zacks Investment Ideas feature highlights: MicroStrategy, Tesla, ARKK, BuzzFeed, Comcast and GameStop

Zacks

Buzzfeed

+12.71%

BuzzFeed, Inc. Warrant

For Immediate Release

Chicago, IL – November 14, 2024 – Today, Zacks Investment Ideas feature highlights MicroStrategy MSTR, Tesla TSLA, ARK Innovation ETF ARKK, BuzzFeed BZFD, Comcast CMCSA and GameStop GME.

2 Meme Stocks to Buy Now

Stocks Explode Post-Election

Whether you agree with President-elect Donald Trump’s economic policies or not, one thing is certain: the conclusion of the 2024 U.S. presidential election on Wall Street has unleashed the “animal spirits.” To be fair, stocks have been on a tear since the bear market lows of 2022, boosted by a falling inflation rate, AI/data center spending, and a dovish federal reserve board. That said, whether it was because of more business-friendly policy expectations, less uncertainty, or a combination of both, the recent election threw gas on the fire.

Unleashing the Animal Spirits

You don’t have to look far to notice that the animal spirits are alive and well on Wall Street. Bitcoin and bitcoin proxies like MicroStrategy have gone on rampages higher. In fact, Bitcoin has flipped silver from a market cap perspective. Meanwhile,Tesla just capped its biggest 5-day rally in four years, the lagging ARK Innovation ETF soared 16% in a week, and small caps have clawed their way back to all-time highs after a multi-year drought. Presently, the market is in risk-on mode, and risk-takers are being rewarded handsomely. Below are 2 “spec” meme stocks to consider:

BuzzFeed

BuzzFeed is a left-leaning media organization recognized for crafting engaging content that often goes viral. The media platform combines pop culture trends and current events infused with humor and casual conversation styles that resonate with a younger demographic. BuzzFeed also delves into journalism, news coverage, and video content creation.

Vivek Takes a BuzzFeed Stake

BZFD has struggled since 2021, falling from nearly $60 to under a dollar at one point. However, former Republican presidential nominee, entrepreneur, and future Trump administration cabinet member Vivek Ramaswamy has injected life into the company by taking ~9% stake. In a letter to the BZFD board, Ramaswamy said, “BuzzFeed has lost its way. I own your stock because I believe BuzzFeed can still become a more valuable company than at its initial listing, but this requires a major shift in strategy.”

If anyone can turn around BZFD, it’s Ramaswamy. “Old media”, particularly left-wing media, has been losing viewership, with the latest evidence being Comcast putting MSNBC up for sale. If Ramaswamy can inject some balance into it, it may have a positive impact. Ramaswamy is a best-selling author with strong connections to “new media” juggernauts like Tucker Carlson.

BZFD Breakout

After coiling for several weeks, BZFD shares are breaking out.

GameStop

GameStop is the leading video game retailer, offering the best selection of new and pre-owned video gaming consoles, accessories, and video game titles, in both physical and digital formats.

GME: The Original Meme Stock

Though GameStop is known for being a video game retailer, on Wall Street, its claim to fame is being the king of the meme stocks and speculation. GME has rewarded investors with several short squeezes in its history, most notably the 1600% one-month gain in early 2021. While many investors may scoff at GME’s fundamentals, the meme mania has real-world benefits on the company.

GameStop’s Massive Cash Hoard

Normally, when a stock becomes a meme stock, it has no net benefit when it eventually crashes down. However, GME’s management team has been savvy and sold millions of shares worth of the stock the last few times it spiked. Now, GME has a massive cash hoard.

The company’s massive cash position gives GME the flexibility to invest back into its business, expand into other businesses, pay a special dividend, etc.

Bottom Line

The U.S. election set off the animal spirits on Wall Street. With meme stocks in vogue, GME and BZFD are two stocks with bullish catalysts worth considering.

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