The Power of Reddit
GameStop stock price closed 2020 at $18.84, according to TradingView data. By mid-January, the stock already doubled in value without any major fundamental drivers. On Friday, January 22, the price action rose over 50% with shares of the video retailing business trading nearly 90% higher on the day at one point.
As major media outlets have started reporting on volatile price movements in shares of the video game retailing business, traders pushed the stock nearly 150% higher on Monday compared to Friday’s closing price. At this moment, it was evident that big players have entered the scene.
It seems that members of Reddit’s WallStreetBets forum have aggressively promoted the stock recently. Numerous posts promoting the stock and even promising donation to humanitarian causes if the stock price continues to ascend. On the other hand, short-sellers have started queuing up as the Street’s consensus is that the company’s stock is overvalued and therefore could be a good short-selling candidate.
A report in Business Insider notes that stock sellers have already lost billions as they placed their bets against the company’s surging shares. Accordingly, big players lost about $3.3 billion so far with nearly half of this amount lost on Friday alone.
"There has been a queue of new short-sellers wanting to get short exposure in GameStop after its recent run-up," Ihor Dusaniwsky, the managing director of predictive analytics at S3, told Business Insider.
The GameStop stock price closed at $76.69 yesterday, with the median Street price target for this stock sitting at $11.96. This practically means that the stock is trading at a premium of 542%, which justifies huge interest to sell shares of the company.
“Generally speaking, stocks with high short interest have been some of the top performers this year," analysts at Bespoke Investment Group wrote in a note recently.
After closing over 18% higher yesterday, the GameStop share price is already trading 25% higher in today’s pre-market trading session.
Shares of the video retailing company GameStop have attracted huge interest from both buyers and sellers, leading to extremely volatile trading on Friday and Monday.
About the Author
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.