Thursday , June 24 2021

Bank of America throws cold water on ‘spectacular’ GameStop spike

GameStop (GME) is undoubtedly the stock of the week. The gaming retailer spiked Monday after retail investors chatting on Reddit talked the company up, forcing a massive squeeze among short sellers.

This week so far, GameStop is up more than 450%. And today alone, shares have risen more than 100%.

Is your head spinning yet?

Well, this momentum might not last, according to analysts at Bank of America (BAC).

GameStop has underperformed for years, they noted, adding that hopes for a turnaround will likely not be enough to really offset the structural pressures the company faces.

The pandemic has forced GameStop to shift more online, where 30% of its sales are now generated — and which GameStop bulls see as a major opportunity. But Bank of America is still skeptical:

Very simply, the more business that shifts from in-store transactions, the more difficult it will be to sell high margin pre-owned and collectibles merchandise which accounted for 46% (estimate) of gross profit dollars in 2019,” said BofA analysts in a note.

Bank of America’s price target for GameStop is $10 … and the company currently trades at more than $370 per share.

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