Please ensure Javascript is enabled for purposes of website accessibility

Bank of America Analyst Sees GameStop Stock Plunging 97%

By Rich Duprey - Jan 27, 2021 at 9:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What goes up must come down, and the video game retailer is primed to come down hard.

Is Bank of America analyst Curtis Nagle trolling GameStop's (GME -4.79%) bullish backers?

As the video game retailer's stock doubled in value once again this morning to over $300 a share, showing no mercy to short-sellers who are being forced to cover their positions because of the stock's stratospheric run, the analyst joined in on the feeding frenzy, raising his price target on the stock sixfold.

But that big upgrade actually comes with a very potent warning for long investors: Look out below! Nagle only raised his outlook on the stock from $1.60 per share to $10 per share, indicating he sees a 97% downdraft in GameStop's future.

Red arrow pointing down over $100 bills

Image source: Getty Images.

The long and short of it

GameStop is riding one of the most spectacular short squeezes in memory. Just five months ago the stock dipped as low as $2.50 per share, meaning it has climbed over 12,000% since then, some 685% since 2021 started, and over 250% since this week began.

Yet that's completely disconnected from anything resembling GameStop's fundamentals. Nagle points out despite whatever enthusiasm investors might hold from activist investor Ryan Cohen's addition to the board of directors, it "will not be nearly meaningful enough to offset structural pressures that will likely accelerate in this console cycle."

He highlights what are likely to be very weak results in GameStop's upcoming earnings report due to weak holiday sales. Coming after years of underwhelming performance as the video game industry transitioned to an online, digital format, fundamentals "will again factor into valuation" at some point and cause the stock price to rapidly deflate.

GameStop doesn't have a moat to protect its profits, and as more business shifts to online transactions, the more difficult it will be for the video game retailer to generate high-margin sales of pre-owned games and collectible merchandise.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
$135.21 (-4.79%) $-6.81
The Boeing Company Stock Quote
The Boeing Company
$141.53 (5.64%) $7.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.