Few Indicators Flashing Warning Signs for GameStop Corp. (GME)

Let’s reassess the active stocks with an eye toward GME stock. Just how should we respond to Monday’s drubbing? Is the mighty fruit now destined to decay? Or is this a mere bruising and nothing more? On 03 December, shares of GameStop Corp. (NYSE:GME) closed higher after a volatile session. The shares accumulated 0.21 points or 1.54 percent at $13.87 with a heavy trade volume of 4.021 million shares. After opening the session at $13.82, the shares went as high as $13.98 and as low as $13.53, the range within which the stock’s price traded throughout the day. The firm is left with a market cap of $1.51 billion and now has 109.19 million shares outstanding. GameStop Corp. (GME) stock has lost -9.64 percent of market value in 21 trading days.

GME stock has a trailing 3-year beta of 1.2, offering the possibility of a higher rate of return, but also posing more risk. The portion of a company’s profit allocated to each outstanding share of common stock was -$0.01 a share in the trailing twelve months. The stock’s value has fallen -22.73 percent year to date (YTD) against a decline of -26.11 percent in 12 month’s time. The company’s shares still trade -31.71 percent away from its 1-year high of $20.31 and 14.25 percent up from 52-week low of $12.14. The average consensus rating on the company is 2.5, on a scale where 5 equates to a unanimous sell rating. In short, the mean analyst recommendations are calling this stock a sell.

GameStop Corp. (GME) will probably climb 7.5 percent over the next 12 months, according to price target estimates compiled by finviz. Meanwhile, they have set a $18-month high price target. This represents a whopping 29.78 percent increase from where shares are trading today. The 12-month median price target assigned by the analysts stands at $15, which represents a return potential of 8.15 percent when compared to the closing price of the stock of $13.87 on Monday, December 03. The lowest price target for the stock is $13 — slightly more than -6.27 percent from GME’s current share price.

History has shown that shares in GameStop Corp. have gone down on 20 different earnings reaction days and are predicted to add 0.05 percent when the company reports upcoming earnings. Investors will get their next glimpse of GME’s Q4 earnings on March 28. Analysts are forecasting revenue to climb 2 percent to $2.03B in the fiscal fourth quarter, while earnings are seen soaring by nearly 5.56 percent to $0.57 per share. It earned $0.05 per share, worse than the $0.08, adjusted, expected by Thomson Reuters consensus estimate. Revenue was $1.65B, better than the $1.62B analysts expected. Earnings are estimated to increase by -77.8 percent this year, -3.62 percent next year and continue to increase by 0 percent annually for the next 5 years.

Let’s take a look at some insider activity at GameStop Corp. (NYSE:GME) and see the pattern. The earliest insider trade took place on 11/27/2017. Shern Stephanie M parted with a total of 4 thousand shares of company at average share price of $17.91. The total for the sales was set at $71.64 thousand. After this transaction, the Director account balance stood at 13.47 thousand shares. The stock lost -22.56 percent since that insider sale. On 01/13/2017, Shern Stephanie M, Director, sold 4 thousand shares at a price per share of $22.58. This removed 90.32 thousand shares from the insider’s fortune and the stock saw a -38.57 percent retreat in value since the news became public. This transaction left 10.93 thousand shares in the Director account.

On 09/15/2016, EVP – President International Mauler Michael performed a purchase transaction worth $269.1 thousand. This purchase at $26.91 each has added 10 thousand shares into the insider’s portfolio position. Meanwhile, shares have recorded -48.46 percent decrease since the transaction was reported. The insider now is left with 120.92 thousand shares remaining in the account. Shern Stephanie M, who performs the Director job, sold 1.77 thousand shares for $55.18 thousand. The disposal occurred on 03/29/2016 was priced at $31.19 per share. The share price plunged -55.53 percent since the reporting date. Shern Stephanie M now left with a stake of 9.51 thousand GME stock worth $131.86 thousand after the insider selling.

The stock is currently hovering around the first support level of $13.61. Below this, the next support is placed in the zone of $13.34. Till the time, the GME stock trades above this level, bulls have nothing to fear. On momentum oscillators front, ‘RSI’ has touched 47.48 on daily chart, which may remain a cause for concern. If the price breaks below $13.34 level on closing basis, then we may see more profit booking and the stock may show further weakness. On the flipside, hitting the $14.06 mark may result into a pull-back move towards $14.24 level.

Shares of GameStop Corp. (GME) are trading at a P/E ratio of 6.02 times earnings reported for the past 12 months. The industry GME operates in has an average P/E of 36.19. Its P/E ratio went as low as 6.94X and as high as 11.72 over the 5-year span.Further, it is sporting a 0.17 on the Price-to-Sales ratio. Compare this with the industry average P/S of 0.71. 32.7 percent is the gross profit margin for GameStop Corp. and operating margin sits at 1 percent. Along with this, the net profit margin is 0 percent.