Video game retailer GameStop (GME 0.21%) has been on a wild ride in recent months. Largely written off as a failing dinosaur in 2019 and early 2020, the stock got a new lease on life when Microsoft (MSFT 1.45%) and Sony (SONY 0.76%) introduced their next-generation gaming consoles last fall. And then the real fun started, as retail investors organized to drive GameStop's heavily shorted stock "to the moon" in January. The stock closed December 11 at $11 per share, skyrocketed all the way to $483 per share on January 28, and then fell back to earth again. Last Friday, GameStop closed the day at $40.59 per share.

Is it time to buy GameStop at more reasonable prices, then? Well, no. Here's why GameStop still looks like a terrible investment.

Past returns are no guarantee of future results

The unique market conditions that set GameStop up for January's fireworks are simply not there anymore.

The number of GameStop shares that were borrowed by short-sellers exceeded the total number of shares, paving the way for the short squeeze to end all short squeezes. A few well-placed trades drove GameStop's trading volume through the ceiling at the drop of a hat, pushing share prices higher and forcing one short-seller after another to cover their negative GameStop bets. Lather, rinse, repeat, and you get this highly unusual stock chart:

GME Chart

GME data by YCharts

The campaign spearheaded by Reddit group WallStreetBets has burned most of its rocket fuel. Thirty-one percent of the company's shares were sold short at the end of January -- still among the largest short-sale ratios on the market but far below the 102% seen at the end of 2020. The explosive ingredients of the big short squeeze have gone away. There won't be another moonshot.

Time to activate the weighing machine

Value investing master Benjamin Graham famously said that "in the short run, the market is a voting machine, but in the long run, it is a weighing machine." GameStop's popularity contest has ended, and it's time to weigh the stock on the merits of the actual business.

From that perspective, I'm afraid that not much has changed. Activist investor Ryan Cohen has grabbed three seats in GameStop's boardroom, including one for himself, and can be expected to push the company toward a strong focus on e-commerce operations. That move is the right one, but it may be too late already.

Cohen argues that GameStop could carve out a significant share of the digital video game market for itself thanks to its well-worn brand name. I'm not so sure that the company can find a foothold against fellow household name (AMZN 2.08%). There's also the uncomfortable fact that most of the console-based games can be downloaded directly from Sony, Microsoft, and Nintendo (NTDOY 1.02%), cutting middlemen like GameStop out of the equation entirely. Cohen has also proposed that GameStop should cook up its own e-sports gaming leagues, cloud-based gaming services, and other interesting top-line drivers, but the GameStop name doesn't strike me as a game-changing asset for these ideas.

A young man looks at an empty wallet, surrounded by many hands holding cash bundles.

It's high time to grab your GameStop profits and run. Image source: Getty Images.

Sell 'em if you've got 'em, boys

GameStop is no better off today than it was in mid-December, but the market cap has more than tripled in those two months. The company has a lot of work to do before I would consider hitting the buy button, and I most certainly wouldn't recommend jumping into the stock at today's overheated prices.

Let the WallStreetBets frenzy fade out before taking action, unless you're already holding GameStop shares. I don't think you'll see a much better chance to lock in what's left of your profits for the foreseeable future.