GameStop stock forecast: Is the latest meme-stock rally over?

By Capital.com Research Team11:20 (UTC), 7 October 2022 Updated

A GameStop store in Portland, Oregon — What next for GameStop after the recent volatility? – Photo: EchoVisuals/Shutterstock.com

Stock price volatility shows no sign of abating for American video game company GameStop (GME). The GME stock price has risen over 10% in the past month, but remains 26% down year-to-date (YTD), and 40% below its August 2021 high of $44.46, when the meme stock once again seemingly became the target of retail traders.

In this article, we will be assessing the latest news, along with its price action and fundamentals, to outline plausible GameStop stock predictions for 2022 and beyond.

GameStop stock news: Ryan Cohen flips BBBY stock

In mid-August 2022, billionaire investor Ryan Cohen opened a large position in cash-strapped retailer Bed Bath & Beyond (BBBY). News of his investment was followed by BBBY surging more than 20% for three days in a row.

According to a US Securities and Exchange Commission (SEC) filing, Cohen bought 7.78 million shares in BBBY, and thousands of call options expiring on 1 January 2023. Strike prices ranged from $60 to $80 a share.

The news could have attracted retail traders to the stock market, with the expectation that short sellers could again be squeezed out of their meme-stock bets, including GameStop.

However, days after Cohen’s SEC disclosure, he sold his stake in BBBY, reportedly banking a $68.1m profit. The GameStop chairman’s actions led to a sharp decline in both the price of BBBY stock and the GME stock price.

In response to actions, investors began prompting the SEC to open an investigation on Cohen’s dealings, according to a report from the New York Post.

GME stock analysis: Technical views and price drivers

GameStop (GME) 5-year price chart

Past performance is not a reliable indicator of future results.

Despite its latest ups and downs, GME’s overall performance this year continues to be negative at the time of writing (7 October 2022). Concerns about the company’s ability to remain afloat in today’s challenging macroeconomic backdrop have weighed on its valuation.

The GME stock price’s 26.59% decline so far in 2022 is higher than the 21.93% loss experienced by the S&P 500 Index (US500) over the same period, but less than the sharp 30% decline of the tech-heavy US Tech 100 Index (US100).

None of the short-lived spikes which the GME stock value has experienced since its turbulent 2021 have led to a higher high. From a technical perspective, the stock continues to be on a downtrend, which could favour a bearish short-term GME stock forecast.

As of 7 October 2022, momentum indicators were pointing to a mixed outlook, with the Relative Strength Index (RSI) neutral at 43.61. Meanwhile, the Moving Average Convergence Divergence (MACD) indicated ‘buy’ at -1.32.

GameStop fundamental analysis: Latest earnings

On 7 September 2022, GameStop reported its financial results for the second quarter of fiscal year 2022.

Revenues ended at $1.136bn – falling from the $1.183bn reported in Q2 2021. The company also reported a $108.7m net loss – significantly worse than the $61.6m net loss year-over-year (YOY).

GameStop said its Q2 inventory rose to $734.8m, from $596.4m a year earlier, “reflecting the Company’s focus on maintaining adequate in-stock levels to meet customer demand and offset lingering supply chain headwinds”.

Sales of software and collectible items contributed close to 50% of total quarterly revenue.

What does the lack of revenue growth mean for any GME stock forecast? Let’s consider the latest GameStop stock projections from analysts.

GME stock forecast: Analyst sentiment

Commenting on the Gamestop (GME) stock forecast, Capital.com analyst Mikhail Karkhalev said:

“The main reason for GameStop stock soaring [at the end of March] was the purchase of additional shares by GameStop’s chair for around $10m. The sharp rise in GME’s share price was picked up by retail traders, which helped the company avoid bankruptcy and now create new products, mainly in the crypto market, in the direction of NFT.”

Karkhalev added that strong growth may be overshadowed by a lawsuit from Boston Consulting Group to the tune of around $30m. Boston Consulting Group is demanding payment from GameStop for consulting services over the past two and a half years.

GameStop responded to the lawsuit by saying it would not be “in stockholders’ best interests to pay the tens of millions of dollars sought by BCG, especially given their seemingly meagre impact on the company’s bottom line”.

“Despite strong revenue growth at the end of 2021, which reached $6bn, a 20% increase over 2020, the company’s losses are still growing. At the end of 2021, the net loss was $381m, already 77% more than in 2020. Bottom line – despite the positive news, lawsuits and losses make investing in GME stock extremely risky,” Karkalev concluded.

GameStop stock forecast: Wall Street ratings

According to data compiled by MarketBeat, the consensus recommendation for GME stock as of 7 October was bearish, with both analysts polled rating the stock a ‘sell’.

The average GameStop stock price target was $22 a share, indicating a 15.35% potential loss. The highest estimate from analysts was $36.50, the lowest $7.50.

Wedbush Securities stated that the earnings report had “underwhelmed” amid an unexpected swing to negative profitability and sparse details about how the firm plans to trim losses to avoid reducing its much-needed cash balance.

“Without guidance or detail, it is difficult to discern whether any of these three things will happen,” Wedbush added, referring to how the company will either increase revenue and gross margins or reduce operating costs.

Analysts from Wedbush recently lowered their price target for GME stock to $7.50 per share, down from a previous 12-month GameStop share price forecast of $30.

Targets for 2022, 2023 and 2025

Algorithm-based forecasting services gave mixed predictions for GameStop’s future price as of 7 October.

Wallet Investor held a slightly bullish short-term outlook for GME stock, based on an assessment of multiple technical indicators. The forecaster set a baseline GameStop stock forecast for 2022 of $27.38 by the end of December 2022, up from $25.99 at the time of writing.

It further predicted GME could reach $42.47 by the end of December 2023 and close 2025 at $72.54. Wallet Investor did not provide targets for 2030, but its five-year GME stock forecast suggested that the stock could hit $99.87 by October 2027.

Gov Capital also had a moderately bullish short-term outlook for GME stock, suggesting the price could rise to $28.70 within a month.

The same service drafted a mixed mid- and long-term GME stock forecast, with an estimated price of $24.57 for December 2022 and $47.01 for December 2023. In the even longer term, the baseline GameStop stock forecast for 2025 stood at $104.19 and $152.29 for October 2027 (ie, in five years’ time).

When looking at GameStop stock forecasts, it’s important to bear in mind that analysts’ and algorithm-based predictions can be wrong. They are based on an analysis of the GameStop share price history – but past performance never guarantees future results.

It’s important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.

FAQs

Is GameStop a good stock to buy?

Whether GameStop (GME) is a suitable asset depends on your trading objectives. It’s important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.

Will GameStop stock go up or down?

Nobody knows. According to the two third-party forecasting services cited above, the short-term outlook for GME stock was moderately bullish, as of 7 October 2022. As for the long term, the two services agreed that the outlook for the stock was positive.

However, analysts also pointed out several important risk factors (detailed above) that you should consider before making a decision to buy or sell the stock.

Should I invest in GameStop stock?

Your decision to invest in GameStop stock should depend on your risk tolerance, portfolio size and goals, and experience in the stock market. You should do your own research to form an opinion on whether the stock is suitable for you.

Remember that past performance does not guarantee future returns, and never invest or trade money you cannot afford to lose.

Is GME a buy, sell or hold?

How you invest is a personal decision depending on your risk tolerance and investing strategy. You should do your own research to take an informed view of the market and decide whether GME is an appropriate fit for your portfolio.

Why has the GameStop stock price been going down?

GameStop has experienced a great deal of volatility in 2022. Some of the reasons for this included disappointing quarterly financial results, and short selling by retail investors.

Will GameStop stock recover?

No one can say for sure if GameStop will ever return to its 2021 highs of over $80 a share. As of 7 October 2022, algorithm forecaster Wallet Investor predicted GME could reach $82.04 in May 2026, while Gov Capital had it at a similar level of $82.03 by November 2024.

However, these predictions are based on past performace and can be inaccurate. Always do your own research before investing, and remember never to invest more money than you can afford to lose.