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Why Is GameStop (GME) Stock Up 25% Today?

Short squeeze favorite GameStop (NYSE:GME)stock is surging again today
The 25% move appears to be driven by sky-high borrow rates and short interest
Speculators are back at it, but will they get burned?
Source: quietbits / Shuttersto…

  • Short squeeze favorite GameStop (NYSE:GME)stock is surging again today
  • The 25% move appears to be driven by sky-high borrow rates and short interest
  • Speculators are back at it, but will they get burned?

Source: quietbits / Shutterstock.com

GameStop is one of the hottest meme stocks still making periodic impressive surges. Today, investors in this retail favorite have seen yet another spike higher, with GME stock accelerating more than 25% in the afternoon session.

This move appears to be tied to newfound interest around another potential short squeeze brewing with the video-game retailer. Rising borrow rates have driven most of the discussion. Additionally, for those looking to short GameStop, there’s fewer shares to short. Approximately 24% of GME shares are sold short at the time of this writing.

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These are the ingredients of a short squeeze. And for those who have watched GME over the past two years, it’s clear the stock has the ability to fly when momentum picks up.

Let’s dive into whether investors may want to consider GME stock as a short-term speculative bet right now.

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Is GME Stock Worth Buying Right Now?

It’s entirely possible we could be witnessing the start of yet another speculative rally in this meme stock. In March, investors saw shares of GME surge from below $80 per share to more than $180 per share in a matter of weeks.

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Today’s increase has taken GME stock from below $90 to more than $110, in a single day. That’s an impressive move. It suggests that retail buyers may not be done trying to take GameStop to infinity.

Indeed, the company has seen more retail interest of late, partly due to its crypto and non-fungible token (NFT) wallet launch earlier this week. With retail investor interest surging, anything’s possible.

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However, from a fundamentals perspective, GameStop shouldn’t be worth a market capitalization of $8.5 billion. This is a money-losing business centered around an industry in secular decline. There’s not much to like about GME stock, especially as recession worries get priced in.

I’ve been wrong on GME in the past. Perhaps this time will be no different than other squeezes. But looking at the longer-term trajectory of GameStop and the current market environment, now doesn’t seem like the time to speculate.

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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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