GameStop Stock Up 23% Today – Time to Buy GME Stock?

The price of GameStop stock surged 22.5% in after-hours stock trading action today following rumors that a marketplace for non-fungible tokens (NFTs) will be launched by the company very soon.

In an exclusive report from the Wall Street Journal released earlier today, sources familiar with the plan stated that the company has already hired a team comprised of around 20 people to build the platform.

The goal of this new unit will be to launch a marketplace through which creators will be able to sell these digital assets such as weapons, outfits, and other similar gear for different games.

Rumors about this particular venture started to circulate in April last year and gained more credibility toward the end of the year as the company published multiple job posts looking for people with expertise in NFTs and cryptocurrencies.

The company has not yet made official any information regarding this program but the launch of this marketplace was deemed as imminent by the sources cited by the Wall Street Journal.

Can today’s after-market uptick become the catalyst that triggers another short-squeeze for GameStop stock? In this article, I’ll be assessing the price action and fundamentals of this meme stock to outline plausible scenarios for the future.

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GameStop Stock – Technical Analysis

Back in December when I last wrote about GameStop, I highlighted that the outlook for the stock was bearish but that there were multiple areas of support that could cushion an upcoming decline including the $118 level.

Since that article came out, the stock price of GME dropped nearly 15% but did not break that last line of defense.

Before today’s news, the technical setup was still bearish as the 50-day simple moving average just posted a death cross after it drifted below the 200-day SMA. Meanwhile, momentum indicators resumed their downtrend today despite the stock finishing the day 1.3% higher.

That said, the “meme” status of GameStop (GME) stock calls for a revision of the current state of sentiment among the retail crowd.

In this regard, data from Swaggy Stocks indicates that GME is the most discussed stock with a total of 3,430 mentions in the past 24 hours. Its comment volume is currently accounting for almost 14% of the total posts that have been published in the popular Reddit forum Wall Street Bets during this period.

However, even though positive comments are surpassing negative ones, a lot of posts are pointing to a neutral reaction from retail traders.

This is an interesting reaction and tomorrow’s price action during the live session may ultimately reveal if this post-market uptick is just an overreaction to a development that has an unknown impact on the firm’s future financial performance.

That said, data from Finviz indicates that short interest for GME stock remains rather high at 13.6%. However, since trading volumes have surged significantly since last year’s pronounced squeeze, short sellers may now be able to cover their positions faster than before and that could limit the extent to which the stock price could surge.

GameStop Stock – Fundamental Analysis

Non-fungible tokens (NFT) are an interesting up-and-coming market that has been gaining popularity amid the appearance of some industries in the making as is the case of the metaverse.

These NFTs can be understood as digital certificates of ownership minted in a blockchain. They allow those who purchase a digital asset to prove that they own it even though others could easily replicate it.

This gives digital assets a formal form of ownership and that enables investors to transact with them as if they were a physical painting or any other form of real-world art.

The pandemic has accelerated the rate at which digital solutions and assets are being adopted across the world and cryptocurrencies, NFTs, and other similar mechanisms are already considered virtual means of exchange.

How can that be translated into earnings for GameStop is still unclear as the company has not yet outlined how this marketplace will work or how it will monetize it.

Therefore, investors may be overreacting to a development that may or may not have a material impact on the financial performance of this company in the future.

Other than that, at its current valuation of $10 billion, GameStop remains a risky bet as the company is still struggling with an outdated business model that is reporting lower and lower sales every year along with negative cash flows.

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