GameStop shares are collapsing, but analyst still sees pinch potential

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GameStop

Stock fell again shortly after the market opened on Tuesday. While some short sellers have seemed to be covering their bearish bets in recent weeks, a short-selling expert says he still sees a lot of squeeze potential.

Shares are down 19% to $ 178.12 around 10:30 am. Such levels are still many multiples higher than the stock’s one-year low of $ 2.57.

Ihor Dusaniwsky, general manager of short-selling analytics firm S3 Partners, said Barron’s Monday that his company estimates that approximately 8.98 million GameStop shares (ticker: GME) have recently been short sold, about 16% of the shares available for trading.

Dusaniwsky said his company has hedged about 7.5 million shorts in the past month, meaning bearish investors bought stocks to cover their bets. The bulk came in the past week, when 4.6 million shares were covered.

“GME shorts are going through a short squeeze, and the stock remains one of the best stocks in our potential short-squeeze measure, meaning the squeeze is likely to continue if the stock price stays at this level or above,” added Dusaniwsky. .

The company’s stock skyrocketed last week following a company announcement that Chewy co-founder Ryan Cohen is chairing a board committee aimed at transforming the retailer into a technology company. Cohen joined the board with two employees in January, kicking off GameStop’s parabolic ascent.

GameStop said it will publish its fiscal fourth quarter results on March 23. Analysts expect adjusted earnings of $ 1.35 per share, up from $ 1.27 per share in the previous fiscal fourth quarter, FactSet said. Of course, analysts are much more bearish on GameStop than the retail investors who post on Reddit’s WallStreetBets forum. The highest price target listed by FactSet is $ 33, while the average target is $ 14.64.

While short-term results may cool the GameStop rally, those excited about the stock are looking far into the future. If the company puts cheerful colors on its ecommerce efforts and the impact of the new game consoles, it could make a quarterly miss more palatable.

Write to Connor Smith at [email protected]