According to BofA Securities analyst Curtis Nagle, investors who expect GameStop Inc. get a boost now that the latest government stimulus payments hit bank accounts, are likely to be disappointed.
Nagle wrote in a research note on Friday that he, in collaboration with BofA’s predictive analytics group, analyzed the potential impact on GameStop’s share of GME,
of the $ 1,400 incentive payments currently being made.
Looking at online forums like Reddit, Nagle said previous sharp increases in incentives and GameStop (GME) conversations seemed to coincide with major price increases. But going forward, Nagle, who is bearish on GameStop stocks, said he believes any positive effect from the “incentives” has already been played out.
[W]I believe the impact may be limited in the future given two factors, ”Nagle wrote in a note to customers.
• “Conversations [sic] these stimulus measures seem to have peaked and GME stocks have fallen in recent days. “
• “The number of recent conversations with both GME and stimulus is low.”
BofA Global Research, ListenFirst
Nagle also pointed out that GME’s trading volumes have also steadily declined and that short-term interest rates have fallen “significantly”. Nagle reiterated his under-rating on the stock and his $ 10 price target.
Trading volume averaged 34.5 million shares per day in March through Thursday, following an average of 43.6 million shares per day in February and 66.4 million shares in January, according to a MarketWatch analysis of FactSet data.
FactSet, MarketWatch
And the most recent exchange data available showed that short-term interest rates as a percentage of the IPO were at 26.1%, up from over 100% when the Reddit-induced trading frenzy began in mid-January.
Shares of GameStop fell 6.7% during morning trading and are down 29.1% this week. That puts the stock on track to hit a three-week earnings streak where it skyrocketed 551.6%, following a three-week loss streak where it plummeted 87.5%.
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Rather than buying shares, it seems increasingly likely that the current $ 1,400 payouts in stimulus and other available funds will be spent elsewhere.
read more: Student Loans, Charity, and Pet Bills – Here’s what the readers do with their $ 1,400 incentive vouchers.
“While we haven’t surveyed consumers about how much they plan to invest in the stock market in the future, respondents in our latest Home Work survey plan to spend the most over the next 12 months on activities limited by COVID- 19, including holidays, dining and travel, as well as investing and furnishing homes, ”Nagle wrote.
Despite this week’s drop, GameStop stocks are still up 1,105.0% over the past three months, while the S&P 500 index SPX,
is up 5.4%.