GameStop has been one of the most affected retail stores by the pandemic. While it used to be a household name and a great place for gamers to go to, it has lost a lot of its shine in recent years. GameStop is also facing competition from two separate industries. GameStop is facing competition from e-commerce (specifically Amazon), which can offer games at the same or lower prices without making customers leave their house; GameStop is also facing competition from platforms such as Steam and Epic Games, which allow gamers to purchase games directly from their laptops and consoles.
However, GameStop has been in the news recently for an extremely unusual reason. GameStop has suddenly turned into the company that is being discarded between traditional investors, but also embraced by new investors.
Traditional investors are not buying GameStop shares because its’ business model has taken such a hit recently, and they do not think it will bounce back anytime soon (if ever). Traditional investors also look at things such as the fundamentals of a company, which includes things like its income statements and past earnings. By these traditional metrics, GameStop is not a buy, and is severely overpriced.
On the other hand, new investors using investing platforms such as Robinhood do not care about the fundamentals of a company. Instead, these investors typically care more about the story and hype of a company. A prominent founder/investor recently bought a ton of shares in GameStop and joined GameStop’s board of directors, and this has led to a ton of enthusiasm from these new investors who think he will help to turn around the company. Also, these new investors are pouring a crazy amount of money into GameStop to show traditional investors that their voices matter, and that traditional investors are not always right.
You should read the full article on Wired here. The article does a great job of explaining the craziness in the stock market right now, and how certain stocks are simply going up because it is popular on a subreddit called Wall Street Bets. It might give you pause in investing in the stock market right now, as seemingly meaningless occurrences can cause stock prices to go up or down by 100% or more in less than a week.
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