The GME stock price jumped by over 5% on Thursday, reaching its highest level since December 18, after announcing store closures and after Ryan Cohen announced a big share purchase. GameStop shares jumped to $23, up by over 14% from the year-to-date low.
GME Stock Price Jumps as Ryan Cohen Buys Shares
GameStop stock jumped after Cohen announced that he had bought 1 million shares, currently worth over $22 million, a sign that he expects it to rebound in the long term. He now owns about 9.3% of the company, with over $930 million.
The purchase came a few weeks after the board gave him a lucrative payout offer. He will have options to buy 170 million shares in the company at $20 if the company’s market capitalization jumps to $100 billion and if it earns an EBITDA of $10 billion.
Cohen’s share purchase was revealed on the same day that the company said that it was shuttering stores as demand for physical video games waned. The company is shutting 470 stores in the United States, bringing the total number of stores shut to over 1,000. Cohen expects to ultimately have 2,000 stores.
GameStop’s business has come under pressure in the past few years as more customers have migrated towards video game streaming. Also, it’s strategy to become a Bitcoin treasury company has failed as Bitcoin has retreated. It now holds 4,710 coins worth over $418 million.
The most recent results showed that the company’s revenue continued to deteriorate. Its revenue dropped to $821 million in the third quarter from $860 million in the same period a year earlier. Analysts expect that its revenue growth will continue to deteriorate in the coming years.
Data compiled by Yahoo Finance shows that the average estimate is that its revenue will be $4.2 billion this year, down from $6 billion in 2021.
However, on the positive side, GameStop has one of the best balance sheets in the retail industry. It has over $7.5 billion in cash and $956 million in marketable securities. It also has over $10.5 billion in total assets against $5.2 billion in liabilities.
GME stock also has a short interest of over 16%, meaning that it may experience a short squeeze as it did in 2021.
GameStop Stock Price Technical Analysis
Technical analysis suggests that the GME stock price may be on the cusp of a strong bullish breakout in the near term. It has formed a double-bottom pattern at $20 and a neckline at $24. This pattern often leads to more upside.
Measuring the distance from the double-bottom and the neckline and the same from the neckline means that it will rise to $28, which is notable as it coincides with the highest swing in October last year
The bullish GME stock price forecast will become invalid if it drops below the double-bottom point at $20.