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Is This Where the GameStop Story Ends?

By Rick Munarriz - Feb 12, 2021 at 10:05AM

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The stock is meandering with its lightest trading volume in a month. There are worse things than being a boring stock.

The meme mob has moved on. GameStop (GME -3.56%) is no longer the tug-of-war between evil hedge funds and noble cage-rattling masses, if that was ever even the case. Thursday was as pedestrian a day of trading activity for GameStop as we've seen in nearly a month. 

Less than 13 million shares of GameStop traded hands on Thursday, the video game retailer's lightest volume since Jan. 12. Remember that crazy time in late January when the stock traded more than 177 million shares for three consecutive trading days? This is the calm after the storm. Even the stock's move on Thursday -- slipping a mere $0.10 or 0.2% on an equally ho-hum market day -- is just blending into the background. It's wearing camouflage, but not because it's ready to battle. 

It was a wild ride, and depending on when you hopped on the spaceship you're either really up or really down on the stock right now. Is GameStop the stock that has wrecked your portfolio by plummeting 89% since peaking two weeks ago? Is GameStop the life-altering wealth creator that's nearly a 20-bagger off its 52-week low? No matter where you started -- and no matter where GameStop's been -- things are moving at a different speed now. Unless you're a speculator hoping to cash in on short-term volatility you should be fine with sleepy out-of-the-limelight GameStop. There are far worse things than owning a boring stock again.

A foundation posing inside a larger GameStop store.

Image source: GameStop.

It's a whole new game

If you think you know the narrative when it comes to GameStop's current market players you may want to double check the playbill. Most of the short sellers -- including a couple of scorched hedge funds -- have been squeezed out now.

GameStop began this month with 21.4 million shares sold short, a still beefy 45% of its outstanding float. However, just a couple of weeks earlier there were actually more shares of the struggling retailer shorted than its actual public float. Short interest fell by 70% between mid-January and the end of the month. 

The ownership narrative also needs to be clarified. The popular observation is that individual investors were taking it to the man by snapping up GameStop, but this was a stock that began the year with more than 51 million shares held by traditional investment managers. If you want a crazy stat, hedge funds were long more than 15 million shares. 

GameStop won't stay boring forever, but it certainly feels that way right now. Here's where it closed in the last three trading days:

  • Tuesday: $50.31
  • Wednesday: $51.20
  • Thursday: $51.10

Speculators may never be able to catch lightning in a bottle again here. Shorts have learned a painful lesson. GameStop may be overvalued by most traditional gauges right now, and the fundamentals continue to deteriorate with every passing year. It's just a dangerous short right now. However, without the naysayers -- and with the market cap still three times higher than it was when the year began -- it's going to take more than a village to get this revolution rally going again. 

GameStop remains an endangered retail stock that in a few weeks will post its eleventh consecutive quarter of declining net sales. It will take a lot of work and a lot of dough for the extreme makeover to stick. It's easier to fix yourself in the shadows, so if the stock trades sideways or even drifts lower this would be the best thing for GameStop in the long run. The saga of GameStop as a meme stock is over. There's no time to play around now. 

This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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