Stocks to sell

Gamestop Won’t Make You Rich Here, But It Could Break You

Gamestop (NYSE:GME) stock staged a massive surge in March that fell away in April. This recent 43% spike likely could be the same.

Investors should remain careful as the stock can cool off significantly in the coming weeks.

The recent spike was likely due to hype, and investors will likely start taking profits as the bullish momentum cannot be sustained in the current market.

In addition, GME stock has been among the most volatile due to the r/WallStreetBets community betting on the stock.

However, the volatility will make GME less attractive to investors seeking stable stocks as the market falls.

Gamestop’s poor finances aren’t going to help it in the long term as well since the company hasn’t turned a profit for more than four years.

GME Gamestop $135.14

A Closer Look at GME Stock

Gamestop’s recent performance was certainly impressive. However, it is evident that the meme is losing steam as GME fails to break previous highs.

With rising interest rates, volatility, wars, supply chain issues and inflation, unprofitable companies such as Gamestop will inevitably be in trouble. The era of low-interest rates has passed, and it will be challenging for Gamestop to rescue its declining finances.

There will also be far fewer people that can afford to risk their money into meme stocks such as GME.

A lack of stimulus combined with high rent and inflation won’t leave much wiggle room for high-risk investments. Therefore, the hype surrounding GME stock will likely continue to decline.

Gamestop’s Outrageous Market Cap

Even though the company has raised significant amounts of money from the GME stock meme, it is unlikely to be enough to stop Gamestop’s long-term downfall.

Gamestop has continued to miss earnings calls, and its net income has continued to go deep into the negative. The recent quarter saw a loss of $157.9 million, which is a 136.38% decline year over year.

The company’s net profit margin has also dropped by 11.46%, a 119.12% decline YoY, while its operating income has plunged by almost 200%.

With those metrics, any serious investor is unlikely to be wooed by Gamestop. The company’s priority should be its profitability, which will likely be an uphill battle in the current market.

Avoid Reckless Investments as the Bear Market Continues

The recent inflation report has made the stock market dip again, and almost all the gains made in the last two weeks have been wiped out. The entire global economy is facing headwinds with global food shortages and a possible recession.

The stock market is also facing extreme volatility, and most investors have started to seek more stable stocks.

Investing in GME stock might have been fun in 2021 when quantitative easing was at its peak and everything went up regardless of fundamentals. However, investing in such stocks now is not a good idea.

Meme assets are likely to have a few spikes, but they are unlikely to pull a profit in the long term.

Therefore, I recommend not buying volatile assets such as GME stock. The window of opportunity has long passed since the stock’s market cap is now almost $10 billion and needs to cool down.

Any gains you make won’t be life-changing, while a sudden crash certainly will be for the worse.

On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is also an active contributor to a variety of finance and crypto-related websites. He has a strong background in economics and finance and is an advocate of blockchain technology. You can follow him on LinkedIn.

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