Video game store chain GameStop saw another surge on Wall Street on Monday, but was held back during the session as observers question the company's business model in the face of the explosion. online games.
Read also: The GameStop action, popular with short sellers, soars to Wall Street
The title ended at 76.79 dollars, up 18% after rising to 159.18 dollars (+ 145%).
GameStop had to be suspended at the start of the session, due to too much volatility, strongly debated on American financial news channels but encouraged on social networks by young Internet users who are fans of the group.
Since the start of the year, the action has taken off by more than 300% on the New York Stock Exchange, including + 51% for Friday's session alone, which leaves even the most fervent supporters of the company perplexed. .
Usually the excitement around a stock market share is due to good results or good growth prospects suggesting a bright future, or even a competitive advantage in terms of market share between the company and its rivals.
Speculation
But here, the business model of GameStop - physical store chains at a time when online games are exploding - is not sustainable over the long term, analysts point out.
Many specialists are wondering in particular about the viability of a model based mainly on in-store purchases at a time when the industry is dominated by online sales, downloads or remote games (“cloud”).
GameStop revenue declined by 3% during the holiday season.
The group's stock market surge therefore seems to be linked more to speculation than to economic fundamentals.
A speculative practice is thus pointed out: short selling, which consists in selling a stock by betting on its collapse in order to be able to buy it back much cheaper at a later date.
“The sudden and abrupt surge in GameStop's share price and valuation has arguably been fueled by forced sell-offs, given the strong interest in short selling (still above 100%) and, in a to a lesser extent, by speculation from individual investors following forecasts on the new cycle in the video game industry and the participation ”
of the venture capital firm RC Ventures, analysts at Telsey Advisory Group said Monday.
“We believe the current share price and valuation is unsustainable and we expect the stock to return to normal / fair value, guided by economic fundamentals,”
they add.
An overvalued share
GameStop is among the most targeted Wall Street companies by speculators, which makes its stock highly volatile.
It is also the subject of countless discussions on the Internet in spaces dedicated to stock market betting, popular with young investors eager for immediate gains.
On the popular "Wall Street Bets" forum on the Reddit site, several participants were betting this Monday on a continuation of the rise in GameStop action, even imagining it rising above $ 1,000.
"If GME hits $ 1,000, I'll get a rocket tattoo!"
, exclaimed one user in particular.
On Twitter, "GameStop" was among the most searched terms on Monday.
The group's action had already swelled in mid-January after the announcement of the arrival on its board of directors of Ryan Cohen, former boss of pet stores Chewy and founder of RC Ventures.
The latter is committed to working for the transformation of GameStop, which wishes in particular to rely on the new consoles from Sony (PlayStation 5) and Microsoft (Xbox Series X and S) to boost its revenues and intends to strengthen its digital offer .
But last week, American financier and speculator Andrew Left of Citron Research found the stock to be overvalued in a video posted to YouTube, which sparked backlash.
Claiming to be the victim of harassment, Andrew Left announced in the wake of turning away from GameStop and affirmed that he intended to take legal action against the intimidation attempts.
