This earnings season is considered the most significant earnings season of the year and there are many important events taking place during it to shift investor perspective away from market fundamentals. The excitement over GameStop (NYSE:GME) and related heavily-shorted stocks is the market sensation right now that simply can’t be ignored.
The rally was prompted by retail investors who placed themselves on social media channels, e.g., Reddit, to spot stocks that hedge funds are inspiring to sell, and then bidding up their values to come up with an abrupt squeeze.
This so-called rebel of retail investors against Wall Street gained more popularity during the past week when Tesla (NASDAQ:TSLA) founder Elon Musk inspired the GameStop rush by tweeting “Gamestonk!!” and adding a link to the WallStreetBets Reddit thread. Musk had long asked the SEC to forbid short-selling, a practice which once harmed Tesla shares.
This exciting social-media campaign run by inspired retail investors would most surely affect the markets in the upcoming week when many big stocks will also share their earnings. Here is the stock traders should keep an eye on as the week unfolds:
Although GameStop isn’t the type of stock long-term investors would prefer to keep in their portfolios during calmer times, the current excitement associated with this video game retailer has become a clear indicator of a potential bubble in equity markets caused by the COVID-19. GameStop has absolutely absorbed the attention of young investors staying at home and searching for the next thrilling idea which could help them make money.
GameStop shares rallied again on Friday, along with other heavily shorted stocks, after the most admired by the retail investors platform, Robinhood shared it was resuming trading of formerly restricted securities.
GameStop rallied last week to over 400% and to more than 1,600% this month as a wide range of retail investors, provoking their peers via social media channels took on hedge fund short positions, thus building short squeezes to damage fund holdings. The stock ended trading on Friday at $325 with a market cap surpassing $22.66 billion. Who knows how this wild buying sentiment would end, but GameStop still is not considered a solid stock serious investors should consider acquiring.
The company has been struggling for years to hold its business, closing numerous stores. Despite the rally, GameStop sales are expected to fall by 18% this year, according to analysts’ prediction.