Is this a good time to invest in video game retailer GameStop (NYSE:GME) stock?
You’ve probably heard about the massive short squeezes with GME stock and stories of meme stock traders becoming fabulously wealthy. Yet, it’s time for a sensible assessment of GameStop as the company’s recent developments don’t bode well for the shareholders.
GameStop may have offered investors a glimmer of hope when it reported positive EPS in 2022’s fourth quarter. But then, GameStop reverted to its typical, unprofitable state in the first quarter of 2023.
Now, with another quarterly earnings report approaching, financial traders should weigh the pros and cons of holding GME stock.
Overall, the stock only deserves a “D” grade because the risk-to-reward balance doesn’t favor the long side of the trade.
Bill Gross’s Warning About GME Stock
Another company, besides GameStop, that has gained the attention of meme stock traders is movie-theater chain AMC Entertainment (NYSE:AMC).
In case you didn’t get the memo, AMC stock recently tanked because a court allowed the company to convert its preferred shares into common shares.
That’s a complex tale that we won’t discuss here. AMC isn’t reluctant to expand the pool of its common shares, which raises dilution concerns.
Apparently, these events prompted Bill Gross, a famous financier who is sometimes known as the “bond king,” to declare, “Another Meme bites the dust — AMC.” Gross followed this with, “GME is next — just my opinion.”
Gross knows a thing or two about the financial markets, so his warning is notable. It’s alarming that GameStop has lost not just one, but two high-level executives this year so far.
Specifically, the company’s board fired CEO Matt Furlong and GameStop Chief Financial Officer Diana Saadeh-Jajeh recently tendered her resignation.
GameStop Throws in the Towel on Crypto Wallets
Often, it’s a bad sign when a company audaciously enters a business venture but then gives up on it within a few years.
Thus, it’s worrisome that GameStop will soon “remove its iOS and Chrome Extension” cryptocurrency wallets from the market, according to a Bloomberg report.
It wasn’t very long ago – May of 2022, in fact – when GameStop launched its cryptocurrency wallet services. Now, the users of these services – and, perhaps, GME stockholders – may be feeling disappointed.
In a similar vein, GameStop launched a marketplace for non-fungible tokens (NFTs) a year ago. Back then, the NFT market was red-hot.
Nowadays, the NFT craze is in the rear-view mirror and GameStop’s hasty venture into this speculative market looks like an ill-conceived move.
GMEAs GameStop evidently backs away from its crypto-wallet business, prospective investors might call the management’s judgment into question.
GME Stock: Don’t Say You Weren’t Warned
Gross provided a stark warning about GameStop, and we’re recommending a cautious stance. AMC’s investors learned a harsh lesson recently, and we wouldn’t want to see GameStop’s shareholders suffer a similar fate.
Sensible investors should try to focus on more successful businesses than GameStop. Sure, meme stocks might get attention in the financial press sometimes.
Yet, this doesn’t mean you should consider GME stock now, and the only rating we’re willing to give it today is a “D” grade.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
