Is Bank of America analyst Curtis Nagle trolling GameStop's (GME -2.06%) 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.