Gamestop Stock (GME Stock) Analysis - Gamestop Short Squeeze - YouTube

hey guys how's it going it's Andy from magoo  investing and happy Monday we finally made it  

to the last week of the year and I’m expecting  a very interesting week when it comes to  

overall volatility we just had the stimulus  bill that was finally passed and then I’m  

expecting to see a lot of maybe some tax losses  people are cutting losses on some stocks that  

didn't do as well try to make their tax bill  look better going into the end of the year  

today I want to talk about a stock that's  been skyrocketing for the past couple months  

and this has been a stock that I have not talked  very positively about in the past I think the  

two times that I’ve talked about it in the past  two years are probably two of my most disliked  

videos because I had very strong opinions about  the company but a lot has changed about that  

so I’m going to be talking about why it's been  skyrocketing the past couple months talk about the  

power of wall street bets uh and how it's played  an important role in pushing a lot of stocks up  

in the past couple months and then I’m going to  finish the video making a bull and a bear case  

for Gamestop Stock (GME Stock) and then you  guys are going to have to come up with your  

own opinions for how you feel about the  future of game stock ticker symbol $GME  

so before we get started I do have to say that  I’m not a licensed financial advisor and this is  

not financial advice anything you hear in this  video is just me giving my own opinions on the  

stock market and you need to do your own research  for making any investment decisions also if you've  

been enjoying these videos I really appreciate  it hit that like and subscribe button as would  

help my channel out a lot so when we first start  talking about Gamestop Stock (GME Stock) I want  

to first talk about the history of the company  for the past couple years at least the stock  

so here I’m going to put up the five year  chart and as you can see it's pretty effective  

at showing the problems that Gamestop Stock (GME  Stock) has been having for the past five years  

at this point for the majority of the past five  years the stock has been cratering and this comes  

mainly off of the struggles with this  company as being a physical retailer and  

the switch that we've been seeing to digital  transactions when it comes to video games  

and so here's a graphic that I found that shows  the total amount of spending on video games  

over the past couple years and so this data  only goes back to 2018 so I’m assuming that  

especially in 2021 we've seen this huge  disconnect between retail and video games  

with the pandemic and I’m expecting this number to  be much larger than what we actually see from 2018  

and so the company's been struggling for a long  time and back in 2019 is when I first start to  

identify Gamestop Stock (GME Stock) as  being this company that's really struggling  

they have poor earnings and as a result they  decide to finally cut their dividend anytime  

a company completely eliminates their dividend the  stock market usually sells it off aggressively and  

as a result the stock shot down 30 because of that  news that's why if you go on robin hood right now  

and look at Gamestop Stock (GME Stock) it says it  has a 10 dividend because this is what the payout  

ratio or what the yield was before they cut that  dividend as a result of the stock price cratering  

for such a long time as a result of that move  the company expects to save 160 million dollars  

every year in cash so that's a positive thing so  now I want to talk about some of the reasoning  

behind why the stock has recovered in the past  couple months and so over the past couple years  

the only person or well-known investor that I’ve  heard that has been very bullish on the future at  

Gamestop Stock (GME Stock) has been Michael Burry  from the big short every couple months it would be  

released that he bought more shares and that would  push the stock up a decent amount there was also a  

time where he sent a letter to Gamestop Stock (GME  Stock) management asking the company to continue  

its share buyback program this was back when  the stock was sitting at four dollars and if the  

company actually did this that would have been an  incredible move considering now it's up above 20.  

and so anytime Michael Burry came out with a  report or maybe an open letter to management  

the stock price would shoot up like 20 percent  go to present day and we have been seeing a lot  

of similar things with news reports anytime a  news story comes out that looks positive about  

Gamestop Stock (GME Stock) the momentum pushes  it up so significantly it's usually like a 20  

move so there have been three news stories in the  past couple of months that have really pushed the  

stock up from looking like a company that could  declare bankruptcy in the next couple years  

to a stock that is recovered significantly and  has an incredible amount of momentum behind it  

so the first one comes back in September  when Chewy Stock (CHWY Stock) found her  

which is ticker symbol $CHWY . The Chewy Stock  (CHWY Stock) co-founder Ryan Cohen announces  

that he bought a 9.9 percent stake in Gamestop  Stock (GME Stock) and he wants to quote compete  

with amazon and so this shoots up the stock price  almost 30% as expectations are either that he's  

going to be making sweeping changes to the company  or there's going to be a takeover eventually there  

have been some discussions about the price point  that he would have to buy the company based off  

of the share price but either way the investors  like the idea of it because it means changes to  

the company and the way things have been going you  really need changes just a couple weeks later in  

October Gamestop Stock (GME Stock) and Microsoft  Stock (MSFT Stock) announced a multi-year  

partnership and I’m still kind of baffled to  why Microsoft Stock (MSFT Stock) really did  

this so in the deal Gamestop Stock (GME Stock)  we'll use Microsoft Stock (MSFT Stock)'s tech  

devices and software in their stores and we'll  be pushing additional Xbox products in exchange  

Gamestop Stock (GME Stock) will get a percentage  of all digital sales from consoles bought at the  

physical Gamestop Stock (GME Stock) locations  and so this is huge because as I mentioned the  

switch that we've been seeing in the gaming market  has been the switch to digital transactions and  

this has really suffocated Gamestop Stock  (GME Stock) because this is not a means  

that they're able to sell their products  and so while we don't know exactly what  

the numbers of this deal are I’m going  to put that graphic back up from 2018  

this is a huge deal for Gamestop Stock (GME Stock)  and so this was one of the reasons why the stock  

price shot up significantly and then the most  recent news was just this past week was Ryan  

Cohen upped his stake to 13% and then Gamestop  Stock (GME Stock) shot up 30% from that news.  

I want to talk about something that has  been pushing Gamestop Stock (GME Stock) up  

a pretty good amount in the past couple months  and it is yes the positivity from the news but  

one of the most interesting parts of investing in  the stock market in 2020 has been the influence  

of wall street bets and so the wall street bets  are wsb is a subreddit that I’ve been following  

for a couple years now as a lurker just because  I do enjoy investing in the stock market and I  

like seeing people that take maybe more risky  positions and have huge payouts so the idea of  

wall street bets is that most people are taking  huge gambles on buying options with very short  

expiration dates way out of the money to  try to get huge profits and so it's very  

common to see people posting how they've lost  most of their account in just a couple trades  

or it's common to see like this guy that made  more than a thousand percent gain in a single year  

and then you have the other group of people on  wall street bets which includes myself called  

theta gang the idea behind theta gang is that  you're selling the options to these people that  

are willing to pay you know ridiculous uh premiums  for pretty much worthless options and so someone  

like myself I love the wheel strategy and the  reason behind it is I’m able to pocket premiums  

reliably and I’m not going to have that  you know a thousand percent increase in  

my portfolio in a single year but I’m  not going to blow up my account so  

those are the two people that are kind of  competing for profits on wall street bets but  

this is a subreddit that commonly rallies behind  very volatile stocks and I’m going to be talking  

about more of these stocks later on this week  but Gamestop Stock (GME Stock) has been one of  

the top dogs recently I found this website that  categorizes each post made on wall street bets  

and a bullish or bearish sentiment based off of  the words that they use and then ranks them by  

popularity and here's the graphic for what that  looks like right now and as you can see wall  

street bets is a very bullish group of people wall  street bets is unified around the goal of waiting  

out the short sellers on Gamestop Stock (GME  Stock) currently shorting stock means that you  

borrow the shares of a company from your broker  with the expectation that you'll pay them back in  

the future with the same shares of that company  plus a little bit of interest and so the broker  

just wants the shares back eventually it doesn't  matter what price you give it back to them at  

the whole point is you want to borrow the  shares from your broker sell them for cash and  

then eventually buy them back at a later date at a  lower price and you're able to keep the difference  

in those two prices but the idea is that you can't  hold on to these shares forever because it is the  

expectation that you're going to have to give them  back you're paying extra money to your broker for  

owning these shares and if it's going the wrong  direction you're not going to hold this forever  

and so this is a very important distinction  between buying puts and shorting a stock say I  

buy a fifteen dollar put on Gamestop Stock (GME  Stock) and the stock tanks down to ten dollars  

that put means that I’m able to sell it to someone  for fifteen dollars instead of the ten dollars  

that it's available on the overall market but the  distinction between the two of them is that if say  

Gamestop Stock (GME Stock) stays high I don't have  to sell at 15 if I don't want to it wouldn't make  

sense for me to sell my shares below the current  market price and so the distinction is with a  

short seller you're required to buy those shares  back eventually whereas if the stock continues to  

go up and I bought my put I can just let it expire  worthless and nothing happens and so the result of  

this is that you're eventually going to have to  close out your position and buy those shares back  

and if a lot of people do that at a single time  it results in a short squeeze which is what the  

people on wall street bets are trying to wait for  at this point so usually just an example b person  

a goes out to close out their position has to  buy the shares back that stock gets pushed up  

in price because the buying pressure increases  person b sees that they're losing out on more  

money and does the same thing it's usually  a rush to try to get out of your position  

as the stock price increases rapidly and normally  we see like a 20 30 40 percent move because  

depending on how big the short interest is on  a stock it can be in a very aggressive move  

and so as you can see right now the short interest  on Gamestop Stock (GME Stock) is pretty high  

and it's been that way for a long time meaning  that a short squeeze is likely going to happen  

eventually as the stock price continues to go  up and so we've seen a couple of short squeezes  

this year the most famous being with Tesla Stock  (TSLA Stock) Tesla Stock (TSLA Stock) was one of  

the most shorted stocks of all time and this year  with its meteoric rise being up over 600 percent  

at this point Tesla Stock (TSLA Stock) short  sellers have lost more money than the entire  

airline industry which is crazy to think about  so it's going to be very interesting to watch I  

do have a position on Gamestop Stock (GME Stock)  right now and I will share that in my video this  

week talking about my current portfolio but  now I want to make a bull and a bear case for  

Gamestop Stock (GME Stock) because I think it's  important to hear both sides of the argument  

I am going to start with the bowl case because  I think that's what most people want to hear  

and the biggest thing for the short term has to  do with momentum this is a stock that's been on  

a tear and a short squeeze is looking more and  more likely the higher the price increases over  

time given that potential of a short squeeze the  upside potential for the short term is crazy I’ve  

seen some people saying that the upside is like  40 dollars I’ve been seeing that sometimes the  

upside is 60 and so there's a lot of positive for  a short term potential also especially since we're  

getting towards the end of the year I think it's  pretty likely that we're going to see this happen  

potentially by the end of the week as some people  that are shorting the stock may try to close out  

their positions to take the tax loss as that  is a very interesting strategy that people  

are trying to minimize their tax bill and for a  stock like game stop that has been going up for  

the past couple months there's probably a lot of  people that are sitting on some huge losses there  

another bold case comes from the history of  Gamestop Stock (GME Stock) here's a graphic that  

overlays the release of each of the video game  consoles over the past decade plus any time that  

a major console has been released the stock price  is shot up and now that we've recently had the  

release of the new Xbox and the ps5 it's possible  that we're going to see a very similar thing  

and then the final bull case that I can think  of is that wall street bets is a powerful group  

even though many people don't really want  to acknowledge it they all trade in the  

same direction even though it's not a massive  amount of money that each person is trading with  

it's the sheer number of people and the fact  that they're all trading in the same direction  

when I say that the trend is your friend the  direction of people trading is also a trend  

that you need to take advantage of and kind  of follow and so since all these people are  

very bullish on Gamestop Stock (GME Stock)  that is a major force it is kind of like  

the equivalent of a mutual fund being bullish  on a stock put all the money together it might  

not reach the same amount of money for each  transaction that we see with a mutual fund but  

it is a huge amount of money it's all going in  the same direction so next I want to talk about  

the bear cases and the first and main one is that  Gamestop Stock (GME Stock) is still in a really  

tough spot the news from Ryan Cohen wanting  to compete with amazon is a really cute idea  

but I don't see it as being very close to being an  actual thing at this point they still have over 5  

500 locations and that's way too much considering  the physical retailers are really struggling  

digital is the future and that graphic that  I showed about sales from the digital means  

meaning that Gamestop Stock (GME Stock) is  getting less and less of each of the actual  

video game sales in this industry that's going  to explode with the recent release of these new  

generation consoles and while the Xbox deal sounds  great I don't think it's going to be as great as  

maybe some people kind of expect it to be it is  sure going to be a positive for the company but  

we really don't know the numbers yet and I don't  think it's going to be enough to save the company  

Xbox was lagging in the last console cycle and  here's how console sales have been looking in  

the past couple years with Xbox really lagging  behind Nintendo and Sony in the last generation so  

we don't know the numbers for the next generation  Xbox but it's going to be interesting to see how  

it looks because that deal with Xbox sounds great  but we really don't know the numbers behind it  

and then finally I don't like the management group  when it comes to Gamestop Stock (GME Stock) he's  

been a company that's never really been  innovative they had the opportunity to buy  

twitch the streaming service but they backed  out of it and amazon ended up buying it and  

they're going to have to reinvent themselves if  they want to survive Ryan Cohen makes that look  

possible with his track record with e-commerce  with Chewy Stock (CHWY Stock) but it's still a  

huge challenge and there's a lot of hurdles  to go through and probably a lot of growing  

pains to make this a successful long-term  investment so overall there's some bullish  

cases or some bearish cases for the short term  I’m pretty bullish long-term decently bearish  

and I will talk about the position that I took  this morning on Gamestop Stock (GME Stock) it's  

going to be a very short position it's going  to expire in three days uh but yeah I thought  

this was an interesting topic I wanted to  talk about the power of wall street bets  

talk about Gamestop Stock (GME Stock) the examples  that we've seen with the momentum being pushed by  

wall street bets with an example like Tesla  Stock (TSLA Stock) and the short sellers  

because I think this was a very interesting  narrative and I’m very curious to see what's  

going to happen at Gamestop Stock (GME Stock) in  the upcoming months maybe as the momentum finally  

slows down so thanks for watching I appreciate all  the support and I will see you in the next video