What is GameStop
GameStop is a video game, consumer electronics, and gaming merchandise retailer based in the United States. The company is based in Grapevine, Texas (a Dallas suburb) and is the world's largest video game retailer. [requires citation] Under the GameStop, EB Games, EB Games Australia, Micromania-Zing, ThinkGeek, and Zing Pop Culture brands, the firm operated 4,816 stores as of January 30, 2021, with 3,192 in the United States, 253 in Canada, 417 in Australia and New Zealand, and 954 in Europe. Babbage's was created in Dallas in 1984, and the company's present name was adopted in 1999.
Due to the transfer of video game sales to online purchasing and downloads, as well as GameStop's failed investments in smartphone retail, the company's performance fell in the mid-late 2010s. The company's stock price, on the other hand, surged in 2021 as a result of a short squeeze coordinated by users of the Internet community r/wallstreetbets. Due to the volatility of its stock price and the GameStop short squeeze, the firm attracted a lot of media attention in January and February 2021. On the Fortune 500, the company is now rated 521st. GameStop owns and publishes Game Informer, a video game magazine, and operates Zing Marketplace, an e-commerce retro gaming and pop culture marketplace in Australia that facilitates consumer-to-consumer purchases.
GameStop is a publicly traded company, making its stock available to anyone of legal age interested in purchasing shares.
Should You Buy GameStop Shares?
GameStop shares will rise and fall in value according to how well the company is performing at a given moment in time. Better-than-expected earnings will make GameStop share prices rise, while weaker earnings will make share prices fall. However, there are many reasons why a company's share price can change.
People trade GameStop shares because, just like other financial instruments, they can be an opportunity to invest money. At a basic level, you can take a position on GameStop shares to get exposure to economic growth. If an economy is in good shape, you might find that companies operating in that specific economic branch or industry will grow too.
Company growth is correlated with share price increases, which is what people are hoping for when they buy GameStop shares.
The original meme stock, GameStop (ticker: GME), has been one of the greatest performers last year. Its stock has risen 707 percent to $152.14 in 2021, far outperforming the S&P 500's gain of 26 percent and the Dow Jones Industrial Average's gain of 17 percent.
However, the company's rise hasn't been fueled by how well its business is doing. Instead, it became a hit on Reddit, where it "no longer trades on traditional basic values or measures, but on retail investors' sentiment, hope, momentum, and the power of crowds."
Unfortunately for long-term GameStop investors, the stock and company were already in trouble before the COVID-19 outbreak, as the video game industry has shifted dramatically from physical discs to internet downloads. In March 2020, though, GameStop faced a near-worst-case scenario. All GameStop locations were temporarily closed due to the global COVID-19 outbreak. In August, GameStop announced that between 400 and 450 locations would be permanently closed in an effort to shrink its way to success.
GameStop stock is traded on the New York Stock Exchange under the GME ticker.
If all that makes you want in on GameStop’s gaming growth, here is everything you need to know to buy GameStop stock & shares to invest in GME.
How to Buy GameStop Shares
Learning how to buy shares may not sound complicated, but you will need to do some research — and learn the basics — before making your first investment.
- Learn the difference between investing and trading
- Review GameStop’s performance and outlook 2022
- Understand the risks and charges
- Access the trading platform and place your orders
- Stay up to date with the latest news and rumors about GameStop
1. Learn the difference between investing and trading
People have two options to buy shares of stock online. Firstly, they can buy shares in companies on the exchanges where they are listed. For instance, you can buy GameStop stock on the NASDAQ exchange, so you own a share in the company (investor). Alternatively, they can buy GameStop shares without owning them, speculating on the price of the underlying asset (trader).
Investing and trading are similar terms that some people will sometimes use interchangeably – but there are significant differences for you to be aware of.
Investing in GameStop Stock
Investors buy GameStop shares hoping their price will rise and they can sell them later for a profit, adhering to the basic principle of buying low and selling high. Investors will take positions over a longer period, attempting to profit from share price changes as well as dividend payments.
While this means that they might need more initial capital to get started when compared to trading, their losses would be capped at this initial price tag. That said, investors should be aware they might get back fewer returns than they initially invested.
Investors will buy GameStop shares to:
- Make a profit from the GameStop share price rising
- Receive an income from dividends if the company pays them
- Benefit from the effects of compounding
This last point requires investors to hold onto their shares for an extended period. That’s why you’ll sometimes hear the phrase ”time in the markets is better than timing the markets” when talking about share investments.
>> Learn how to invest in stocks
GameStop (or any single stock, for that matter) can be a very volatile investment. You can lower the risk by diversifying your investment holdings.
An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund provides a broad market exposure, low operating expenses, and low portfolio turnover. These funds follow their benchmark index regardless of the state of the markets.
GME currently makes 0.1% of Russel 1000 and Russel 2000 indices, meaning $0.1 of each dollar you invest in a Russel index fund goes to GameStop.
Social sentiment exchange-traded funds (ETFs) provide exposure to the performance of companies within the global software industry.
GME makes up 6.85% of FTXD (First Trust Nasdaq Retail ETF), 4.31% of MEME (Roundhill Meme ETF), 4.00% of SFYF (SoFi Social 50 ETF), 3.60% of BUZZ (VanEck Social Sentiment ETF), 3.32% of XMMO (Invesco S&P Midcap Momentum ETF).
>> Learn what ETFs are and how do they work
Trading GameStop CFDs
On the other hand, traders might seek to capitalize on short-term share price gains. Rather than investing in the shares, traders speculate on the shares’ value. They can speculate on it rising by going long, as well as falling by going short.
Trading GameStop stock means that you are speculating on a share’s price movements with derivatives like CFDs. In other words, you are purchasing GameStop shares without taking direct ownership.
Leverage is available when you use this product, giving you full market exposure for an initial deposit – known as margin – to open your position.
For example, a trader who wanted to buy 100 GameStop shares CFD at $150 per share would only require $3,000 of trading capital, thereby leaving the remaining $12,000 available for additional trades.
But keep in mind that leverage can increase both your profits and your losses as they will be based on the full exposure of the trade, not just the margin requirement needed to open it. This means losses, as well as profits, could far exceed your margin.
With CFDs, you can ‘buy’ (go long) the shares if you think the GameStop stock’s price will rise, or you can ‘sell’ (go short) if you think the GameStop stock’s price will fall.
>> Learn what is CFD trading and how it works
Going Long GameStop CFD
GameStop has a sell price of $141.80 and a buy price of $142.20.
GameStop’s next earnings announcement is fast approaching, and you expect it to be good news.
You think the company’s share price will go up, so you buy 200 GameStop CFDs at $142.20 This is the equivalent of buying 200 GameStop shares.
Because in CFD trading you can use leverage, you do not need to put up the full value of GameStop shares. Instead, you only need to cover the margin, which is calculated by multiplying your exposure with the margin factor for the market you are trading.
So, if GameStop has a margin factor of 20%, your margin would be 20% of the total exposure of your trade (200 share CFDs x $142.20 = $28,440), which is $5,688.
If your prediction is correct:
When GameStop announces its results, it is clear the company had a successful quarter and as you had predicted, its share price climbs.
You decide to close your position when it reaches $154.20, with a buy price of $154.60 and a selling price of $154.20.
You reverse your trade to close a position, so you sell your 200 CFDs for $154.20.
To calculate your profit, you multiply the difference between the closing price and the opening price of your position by its size. $154.20– $142.20 = $12, which you multiply by 200 CFDs to get a profit of $2,400.
If your prediction is wrong:
GameStop’s results are worse than expected, and its share price immediately falls. You decide to cut your losses and sell your 200 CFDs at $136.20.
Your position has moved $6 against you, meaning you suffer a loss of $1200.
Going Short GameStop CFD
Shorting with derivatives can be an effective way to protect your investments against downward price movements in your non-leveraged investment portfolio. Also, it can be a way to generate profits outright from shares that are falling in value. But when you go short, your potential losses are theoretically uncapped because there is no limit on how high a company’s share price can rise.
Here is an example:
Suppose GameStop shares are currently trading with a selling price of $141.80, and you think the price will go down. So, you decide to open a short CFD position on 100 GameStop shares CFD. A week later, the buy price reaches $132.40, and you close your position. This means you made $940 in profit ([141.80 - 132.40] x 100 = $1,800), excluding additional costs.
If the price rises, you register a loss. For example, if GameStop shares rose to a price of $145.30, you would suffer a $350 loss instead, excluding additional costs.
When you create a trading account with CAPEX, you will be able to:
- ‘Buy’ (go long) or ‘sell’ (go short) GameStop and other 2,000 international shares to speculate on their price rising or falling
- Take a position on our range of ETFs to get exposure to a basket of shares from an entire country, index, or sector that could be rising or falling in price.
- Trade a host of global indices to go long or short on the performance of an entire economy with a single trade.
- Use QuantX, the smart portfolio builder that helps you cover the popular industries and only invest in the top-performing stocks.
2. Review GameStop’s Performance and Outlook 2022
Before buying GameStop stock—or any stock (see our guide on how to buy shares)—it’s wise to do some research into the company’s financials, performance, and outlook. The easiest place to get started is through a company’s annual reports and quarterly reports. Public companies like GME are required to publicize detailed information about their financial health in these.
You can find these on GameStop’s investor relations site or by searching the Securities and Exchange Commission’s (SEC) database.
You may also turn to experts for their input. Brokerage companies frequently release commentary on major stocks and industries, and third-party evaluators like Trading Central provide comprehensive technical and fundamental analysis.
When you combine financial data with expert insight, you will be able to decide how much of your money you want to put into GameStop stock.
GameStop Shares Forecast - Fundamental Outlook 2022
Before you load up the trunk with GameStop shares, pop opens the hood and see what you are really getting into. Remember, when you buy GameStop stock, you are purchasing a small portion of an actual business:
GameStop Corp. engages in the retail of multichannel video game, consumer electronics, and wireless services.
GameStop's balance sheet, income statement, competition, and management (all explained in our guide on how to research stocks) will help you give the company a good once-over.
You can access research, analyst ratings, and other key information about GameStop via your brokerage account or a financial information website. If you like what you see, your next step is to consider whether GameStop fits into your current investment portfolio.
GameStop's market capitalization is $8.92B
- GME has a -4.07 percent Return On Assets. This is lower than the industry average of 8.23%. GME is outperformed by 85% of its peers in the industry.
- GME has a -2.61 percent profit margin. This is lower than the 5.33 percent industry average. GME is outperformed by 83 percent of its peers in the industry.
- GME is fairly valued, with a price-to-book ratio of 5.08.
- GME had negative earnings last year, resulting in a negative Price/Earnings Ratio.
- In addition to the negative Price/Earnings Ratio, GME's Forward Price/Earnings Ratio is also negative. For the coming year, no positive earnings are projected.
- When comparing GME's price book ratio to the industry average of 2.77, it becomes clear that GME is more expensive than its peers.
Over the last year, the Earnings Per Share has increased by 44.49 percent.
GME is expected to raise its earnings per share significantly over the next five years, according to projections. On average, EPS will increase by 14.88 percent per year.
In the previous year, revenue increased by 13.89 percent. This is excellent.
Revenue growth is accelerating: in the next five years, revenue will grow faster than in the previous five years.
Revenue is predicted to increase somewhat at GME. Revenue will increase by 2.02 percent every year over the next five years.
GME has had a significantly negative revenue growth rate during the last five years. The revenue has been declining at a rate of -11.48 percent every year on average.
- When compared to the average industry Current Ratio of 1.49, GME is better positioned to satisfy its short-term obligations than the average business competitor.
- GME is in a stronger position than the industry average to satisfy its short-term obligations. The company's current ratio is significantly higher than the industry average of 0.67.
- When comparing GME's Debt to Equity Ratio of 0.03 to the industry average of 0.29, it's clear that the company is less reliant on debt than its competitors.
- The Current Ratio of GME is 1.90. This is a normal value, indicating that GME is financially sound and should be able to satisfy its short-term obligations without difficulty.
The Quick Ratio of GME is 1.16. This is a normal value, indicating that GME is financially sound and should be able to satisfy its short-term obligations without difficulty.
*Last update: December 2021. Source: Yahoo Finance
GameStop has never declared or paid a cash dividend and does not intend to pay.
GameStop Shares Forecast - Technical Outlook 2022
Technical traders analyze price charts to attempt to predict price movement. The two primary variables for technical analysis are the time frames considered and the technical indicators that a trader chooses to utilize.
Our web-trading platform, for example, offers 6 chart types (including the famous Japanese candlestick chart) to help you analyze price performance across different timeframes. It also enables you to deal in an instant – directly from the charts. You will be able to open, close and edit positions in just a couple of clicks.
Trading charts always feature distinct patterns that technical analysts can use to interpret the behavior of buyers and sellers. These chart patterns can give traders an indication of where the market could go next. As you will notice when you look at a chart, the market will usually move in one overall direction or trend. There are three types of market trends: uptrends, downtrends, and sideways trends.
GameStop stock has lost momentum since January 2021 spike up from $20 to $500.
The price chart shows a clear sideways movement (range market) with price testing the support of the range. The technical indicators signal a bullish divergence and GME stocks can rebound from this level.
Speculators can use this level for short-term trades within the range, as the risk/reward ratio is favorable. The next resistance and potential profit target are $230. The GME stock price could sell off to $40 before trending up again.
To buy GameStop shares or not?
It is recommended to watch for stocks in the major long-term support area. We should buy GameStop shares at relatively cheap prices (compared to historical values), not expensive prices. Also, have an exit plan for how you will exit a profitable trade. Define how and why you will exit. Since we used to support to get into the trade, you may consider exiting just below a long-term resistance level.
If buying at support, and planning to exit just below resistance, the upside potential should outweigh the downside risk by at least 2:1 or even 3:1. That means that if you buy GameStop shares at $120, you should be reasonably able to get out of the stock at $95 or higher. In an absolute worst case you lose $25 a share, but based on the historical chart it is quite feasible to go up to $50/share or more. This is known as the risk/reward ratio, a key indicator when deciding to buy GameStop shares or not.
With CAPEX WebTrader, you can perform an in-depth analysis of the charts with 90 indicators (including moving average, MACD, RSI, and Bollinger Bands). The platform also supports an interactive trading activity with high-end research tools helping you interpret market data.
Analyst consensus - SELL
The current consensus among 10 polled investment analysts is to sell stock in GameStop. The buy percentage consensus is at 42. So analysts seem to be rather negative about GME.
- Hold (3)
- Sell (5)
- Strong Sell (2)
The price target on GameStop (+42.35%)
The 10 analysts offering 12-month price forecasts for GameStop have a median target of $72.42, with a high estimate of 145.00 and a low estimate of 23.00. This target is -40% below the current price.
3. Understand the risks and charges
Trading can be seen as riskier than investing due to leverage. But investing also carries a risk – and there is no guarantee that your investments would increase in value, so you could receive back less than you initially invested.
Before deciding to trade in shares, you should take steps to manage your risk. We have courses at CAPEX Academy that take you through risk management and how to mitigate your exposure to risk in the financial markets.
Our costs and charges for trading vary depending on the product that you use to take a position.
GameStop (GME) CFD Trading Conditions
|SPREAD PER UNIT||0.42 pips||LEVERAGE||1:5|
|OVERNIGHT ROLLOVER - LONG||-0.0076 %||OVERNIGHT ROLLOVER - SHORT||-0.0063 %|
|INITIAL MARGIN||20.0000 %||MAINTENANCE MARGIN||10.0000 %|
- Spread represents the difference between ASK price and BID price.
- Future Rollover adjustment consists of the difference in price between expiring contract and new contract as well as the spread of the CFD.
- Swap is the amount credited to or debited from an account where positions are held overnight.
- Inactivity fee represents the monthly amount deducted if no activity is recorded for 12 months in an account.
4. Access the trading platform and place your orders
To buy GameStop shares CFD with CAPEX Webtrader is very easy and intuitive. Opening an online trading account is as easy as setting up a bank account. Here are the steps:
Open an account or log in
First, create an account or log in on capex.com. To open an account, click the "Register" button and complete your details.
Once the platform is accessed, the registration process must be completed in order to operate with real money. Click "Complete the Registration and Start Trading".
To log in, from the CAPEX website, click on "Login".
Deposit funds into your account
To trade with a live account, it is necessary to deposit funds. This is done from the platform itself by clicking on the "Add funds" button:
Also, it is possible to trade on a risk-free demo account with a balance of € 50,000, which is ideal for getting to know the platform and testing trading strategies.
CAPEX offers you different payment methods: debit cards, credit cards, bank transfer, skrill, and more.
It is noteworthy that CAPEX does not charge any fees or commissions for depositing funds.
Look for GameStop shares
To view GameStop shares (GME) real-time price and chart on the trading platform can click on the "Search" icon located in the left panel or by clicking on "Shares" and then select the instrument, in this case, GameStop.
Use the indicators and drawings to analyze the chart
Click the indicators icon and select your favorite ones. There are trend-following, oscillators, volatility, and support/resistance indicators available. To learn how many indicators to use and how to combine then visit the Technical Indicators section in CAPEX Academy.
Set up the order to buy GameStop shares
To buy GameStop shares CFD, click on the "Buy" button and a window is displayed to configure the purchase order:
The number of GameStop shares to be purchased must be entered and it is allowed to set up a Stop Loss to limit the potential loss, and/or a Take Profit to close a profitable position once the GameStop stock reaches a specific price. These orders can be configured based on price, pips, cash value, or percentage.
To proceed with the purchase, click on "Place Order".
However, GME trading does not end here. You will want to check out the next step to make sure you are investing your money as well as you can.
Why Trade GameStop with CAPEX?
- Advanced AI technology at its core: Whether they prefer the web-based and mobile-ready WebTrader or favor the highly popular MetaTrader 5, we make sure investors make effective use of fast and reliable trade execution speeds, complex order and risk management tools, advanced charting options, powerful research tools in collaboration with highly-regarded platforms such as Trading Central or TipRanks.
- Trading on margin: Providing trading on margin (up to 5:1 for individual equities), CAPEX gives you access to the stock market with the help of CFDs.
- Trading the difference: When trading GameStop CFD, you do not buy the underlying asset itself, meaning you are not tied to it. You only speculate on the rise or fall of the GameStop stock price. Online trading with CFDs is nothing different from traditional trading in terms of strategies. A CFD investor can go short or long, set stop loss, take profit, and apply trading scenarios aligned with their objectives.
- All-round trading analysis: The browser-based platform allows traders to shape their market analysis and forecasts with sleek technical indicators. CAPEX provides live market updates and various chart formats, available on desktop, iOS, and Android.
- Focus on safety: capex.com is operated by Key Way Investments Ltd and is authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC) (license no. 292/16).
- Global partnerships: CAPEX is proud to be the Proud Sponsor of Juventus, one of the most prestigious football clubs in the world, a football club that has a special place in the hearts of the people of Italy, with a strong legacy and a dedicated community.
5. Stay up to date with the latest news and rumors about GameStop (GME)
Get the latest GameStop Inc. (GME) stock news and headlines to help you in your trading and investing decisions.
History of GameStop
GameStop went public in February 2002 through an initial public offering. With 67 percent of outstanding shares and 95 percent of voting shares, Barnes & Noble retained control of the newly public firm. Barnes & Noble kept control of GameStop until October 2004, when it distributed its 59 percent ownership in the company to Barnes & Noble shareholders, effectively separating it from the corporation.
In 2005, GameStop paid $1.44 billion for EB Games (previously Electronics Boutique). GameStop's business was expanded across Europe, Canada, Australia, and New Zealand as a result of the acquisition. Two years later, in 2007, GameStop paid an unknown sum to Blockbuster LLC for Rhino Video Games. Rhino Video Games owned and operated 70 video game businesses across the Southeast.
MovieStop was launched in 2004 as a stand-alone store specializing on new and used movies by GameStop. More than 42 outlets were opened, most of them were next to or adjacent to GameStop stores.
GameStop purchased Free Record Shop's 49 Norwegian locations in April 2008.
Kongregate, a San Francisco-based website for browser-based games, was acquired by GameStop in 2010. It was sold for $55 million in 2017.
Spawn Labs and Impulse were acquired by GameStop in separate transactions in 2011. Spawn Labs was a company that created technology that allowed people to play video games on machines in data centers rather than on their own computers or consoles.
BuyMyTronics, a Denver-based online marketplace for consumer electronics, was bought by GameStop in 2012.
Spring Mobile, a Salt Lake City-based retailer of AT&T-branded cellphone services, was bought by GameStop in November 2013. In February 2015, it purchased 163 RadioShack outlets. It bought Geeknet in July 2015.
Due to downloadable games on services like Xbox Live, PlayStation Network, Nintendo eShop, and Steam, the demand for hard game media has been declining. GameStop has seen a drop in sales as a result of this. GameStop reported a 16.4% reduction in Christmas sales for 2016 but voiced optimism in its non-physical gaming businesses in 2017.
The financial reports for 2018 revealed the company's largest loss in its history. GameStop reported a record-breaking financial loss of $673 million for the 52-week period ending February 2, 2019. This was a change from the prior year's net profit of $34.7 million. Net revenues for fiscal year 2018 were $8.29 billion, down 3% from the previous year. In addition, the firm got rid of dividends.
A short squeeze in January 2021 resulted in a 1,500 percent gain in GameStop's share price over the course of two weeks, reaching an all-time intraday high of US$483.00 on the New York Stock Exchange on January 29, 2021. The Reddit community r/wallstreetbets, a subreddit dedicated to equities with high market risk, was largely responsible for this effect. Extended-hours trading saw a spike in the stock price after Elon Musk posted on Twitter with the phrase "Gamestonk!" (a reference to r/wallstreetbets) and a link to the community. Matt Levine has compared the incident to Philip Falcone's "short squeeze" allegation from the SEC in 2012.
*Last Update: December 2021. Source: Wikipedia