Roaring Kitty vs. Risks: Why Investors Should Avoid GameStop Stock Now

InvestorPlace07-18

GameStop (GME) stock has been very volatile recently, surging and plunging on several key headlines. Roaring Kitty has shifted focus, but there are catalysts boosting the stock. Let’s dive into the ...

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Indeed, with Keith Gill’s influence, this stock has seen incredible surges in recent years. However, investors now appear to be proceeding with caution regarding GameStop stock right now.\nGill’s return led to renewed retail interest, but the lack of positive news caused a sharp sell-off in GameStop stock. Many questions remain about the stock’s future direction. GameStop stock is likely to continue falling. Let’s dive into why that may be the case.\nVolatility and GameStop Stock\nGameStop’s stock rose nearly 8% over the past week to about $26 per share at the time of writing, outperforming the Nasdaq’s 0.43% gain. This increase came despite meme influencer Roaring Kitty, known for driving the 2021 meme stock surge, remaining absent from the spotlight.\nGill returned online in May after a three-year hiatus, boosting GME stock with tweets and a June livestream. He increased his holdings to 9 million shares, worth $233 million, and recently tweeted a cartoon dog, impacting Chewy’s (NYSE:CHWY) stock. \nWith Gill quiet for nearly a month, GameStop’s latest price rise followed its new collectibles initiative, marking a shift from traditional video game retail.\nGameStop announced a $25,000 reward for the rare black parallel Lionel Messi sticker from the 2024 Panini Copa America collection. The sticker must have a PSA grade of 6 or higher, and the promotion runs until the end of 2024. \nThis initiative supports GameStop’s strategy to expand beyond video games and capitalize on Messi’s popularity after his move to Inter Miami.\nThat said, the question is whether such initiatives will be enough to promote continued share price growth moving forward. There are plenty of skeptics out there who are rightly concerned. \nRoaring Kitty Poses Mystery\nGill gained fame in 2021, leading retail investors to propel GameStop’s stock to new heights. By April 2021, his holdings exceeded $34 million, as shown in a WallStreetBets post. \nIt’s uncertain if he sold those shares, but selling at the peak could have netted him over $60 million, which raises questions about his recent investments. Plenty of questions have abounded as to where Gill got the money to increase his bets on GameStop so dramatically.\nGill’s recently trading drew the Massachusetts Securities Division’s scrutiny, leading to an investigation for possible stock manipulation. Additionally, E*Trade contemplated closing his account over concerns. As of June 2, his portfolio indicated nearly $211 million in GameStop, requiring a 250% payout increase since his last sale three years earlier. \nGill disclosed owning 6.6% of Chewy’s stock worth over $240 million as of July, raising questions about how he financed this transaction. While he could have sold GameStop shares, he hadn’t updated his Reddit followers on his holdings. \nIf Gill has moved on to other meme stocks entirely, the bull thesis behind GameStop may not be as solid as many “apes” investing in this stock may think.\nGME Stock Looks Risky Here\nFor long-term investors, speculative assets such as meme stocks or short squeeze candidates don’t usually fit the bill as appropriate investments. These stocks tend to be highly volatile, and that’s certainly the case for GameStop. Outside of speculative demand, there are few growth drivers here that justify the sort of valuation the company currently trades at, never mind where some bulls think the stock could be headed.\nIt’s my view that GameStop and other highly volatile plays are best avoided right now, from both sides of the trade. Shorting or going long (either directly or via options) is a risky strategy. And with so much volatility already priced into this stock’s borrow rate and implied options volatility, there’s not much to gain from betting on this stock. That’s my two cents. \nOn the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.\nOn the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.\nChris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.Technology, Video Games \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\nSubmit\n\n\n\n\n\n\n\nArticle printed from InvestorPlace Media, https://investorplace.com/2024/07/roaring-kitty-vs-risks-why-investors-should-avoid-gamestop-stock-now/.\n©2024 InvestorPlace Media, LLC","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2452065111"}