Given everything we know about this business and the news of horrible quarterly results over the past year and a half, Gamestop is one bad quarter away from total bankruptcy.
Let's take a look at we have going forward on the 1 month chart data:
Falling volume, momentary rise in price these past couple weeks, converging trend lines all signaling a bearish breakout in the short term in classic rising wedge formation. Add to that the MACD approaching zero line crossover, falling RSI, and market indecision on Ichimoku cloud with a bearish lean according to Base Line (Kijun) crossing above Conversion line (Tenkan) & Lagging Span (Chikou) used as filtering despite price hovering within Kumo cloud. Fib-EMAs also showing strong likelihood of a breakout & maintenance of this trend in the short term.
Stay tuned from now until early January 2020 for breakout.
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EXTREMELY HIGH RISK TRADE, HIGH REWARD SCENARIO:
the ONE THING that can absolutely put an axe to my analysis is the disturbingly high short ratio being far greater than both the float and shares outstanding. If they actually manage to cook the books/ fudge the numbers in such a way that investors are convinced that the company is making a comeback, then we could very well have a situation mirroring that of Volkswagen AG stock boom in October 2008. CLASSIC SHORT SQUEEZE.
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Correction: disturbingly high short interest **
Short ratio is also very high and cause for concern for those who are shorting.
No one wants to go into the new retro-designed stores only to be hounded to buy extra stuff by staff while playing video games on their retro tube TVs or while they're busy with their table top games.
We have smaller mom & pop shops that do this already and have solid communities build around them with proper discounts, incentives and ambience. Everyone has gone the route of buying games digitally, the disc has become a novelty of the past whose void said mom & pop shops now fill.
Why would I bother signing up for a Gamestop PUR card when it offers a meager $5 discount off of new games per month that doesn't roll over? I repeat, this is just for new games. Their bread and butter is the used game market and they've failed to accommodate that. Why would I sell my used games to them when they offer scraps for it in stores, rather than selling it online for more or to aforementioned mom & pop stores that ALSO offer more? Again, another major part qualitative metric of their fundamentals they're letting go to utter waste. Do they even care anymore?
Their saving grace is limited to leveraging their massive short interest & using their free cash on hand to figure out how to stop the bleeding in every subsequent quarter from here on out.
The brand was strong in the past, and its been spiraling towards its inevitable demise in a path similar to that of Blockbuster Video, RadioShack & now JC Penny.
CryptoParadyme
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@tghafoor, I get the bear argument. As long as their books looks good and they are cutting costs i see hope.
iirc used games was only ~21% of their revenue. So I'm not sure that's their bread and butter alone. But I'm seeing steps towards innovation and it's a worthy gamble at such a low price.
tghafoor
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@CryptoParadyme, Make sure your stop loss orders are in order, my guy. Good luck, as I've said. This is a contrarian approach if I've ever seen it.
It could be an extremely lucrative short squeeze for you. But I, personally, don't see it.
tghafoor
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@CryptoParadyme, Also thank you for your encouragement. Good luck out there trading !
tghafoor
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Please feel free to disagree and add your thoughts here. Thanks a lot.
tghafoor
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Also, their proposed stock buyback program means nothing if they continue down the path of hemorrhaging money.
Have you even looked at their books? Gamestop is far from bankrupt.
GG on the downside call. I've added at this level.