hey guys how's it going it's Andy from magoo investing and happy Monday we finally made it
to the last week of the year and I’m expecting a very interesting week when it comes to
overall volatility we just had the stimulus bill that was finally passed and then I’m
expecting to see a lot of maybe some tax losses people are cutting losses on some stocks that
didn't do as well try to make their tax bill look better going into the end of the year
today I want to talk about a stock that's been skyrocketing for the past couple months
and this has been a stock that I have not talked very positively about in the past I think the
two times that I’ve talked about it in the past two years are probably two of my most disliked
videos because I had very strong opinions about the company but a lot has changed about that
so I’m going to be talking about why it's been skyrocketing the past couple months talk about the
power of wall street bets uh and how it's played an important role in pushing a lot of stocks up
in the past couple months and then I’m going to finish the video making a bull and a bear case
for Gamestop Stock (GME Stock) and then you guys are going to have to come up with your
own opinions for how you feel about the future of game stock ticker symbol $GME
so before we get started I do have to say that I’m not a licensed financial advisor and this is
not financial advice anything you hear in this video is just me giving my own opinions on the
stock market and you need to do your own research for making any investment decisions also if you've
been enjoying these videos I really appreciate it hit that like and subscribe button as would
help my channel out a lot so when we first start talking about Gamestop Stock (GME Stock) I want
to first talk about the history of the company for the past couple years at least the stock
so here I’m going to put up the five year chart and as you can see it's pretty effective
at showing the problems that Gamestop Stock (GME Stock) has been having for the past five years
at this point for the majority of the past five years the stock has been cratering and this comes
mainly off of the struggles with this company as being a physical retailer and
the switch that we've been seeing to digital transactions when it comes to video games
and so here's a graphic that I found that shows the total amount of spending on video games
over the past couple years and so this data only goes back to 2018 so I’m assuming that
especially in 2021 we've seen this huge disconnect between retail and video games
with the pandemic and I’m expecting this number to be much larger than what we actually see from 2018
and so the company's been struggling for a long time and back in 2019 is when I first start to
identify Gamestop Stock (GME Stock) as being this company that's really struggling
they have poor earnings and as a result they decide to finally cut their dividend anytime
a company completely eliminates their dividend the stock market usually sells it off aggressively and
as a result the stock shot down 30 because of that news that's why if you go on robin hood right now
and look at Gamestop Stock (GME Stock) it says it has a 10 dividend because this is what the payout
ratio or what the yield was before they cut that dividend as a result of the stock price cratering
for such a long time as a result of that move the company expects to save 160 million dollars
every year in cash so that's a positive thing so now I want to talk about some of the reasoning
behind why the stock has recovered in the past couple months and so over the past couple years
the only person or well-known investor that I’ve heard that has been very bullish on the future at
Gamestop Stock (GME Stock) has been Michael Burry from the big short every couple months it would be
released that he bought more shares and that would push the stock up a decent amount there was also a
time where he sent a letter to Gamestop Stock (GME Stock) management asking the company to continue
its share buyback program this was back when the stock was sitting at four dollars and if the
company actually did this that would have been an incredible move considering now it's up above 20.
and so anytime Michael Burry came out with a report or maybe an open letter to management
the stock price would shoot up like 20 percent go to present day and we have been seeing a lot
of similar things with news reports anytime a news story comes out that looks positive about
Gamestop Stock (GME Stock) the momentum pushes it up so significantly it's usually like a 20
move so there have been three news stories in the past couple of months that have really pushed the
stock up from looking like a company that could declare bankruptcy in the next couple years
to a stock that is recovered significantly and has an incredible amount of momentum behind it
so the first one comes back in September when Chewy Stock (CHWY Stock) found her
which is ticker symbol $CHWY . The Chewy Stock (CHWY Stock) co-founder Ryan Cohen announces
that he bought a 9.9 percent stake in Gamestop Stock (GME Stock) and he wants to quote compete
with amazon and so this shoots up the stock price almost 30% as expectations are either that he's
going to be making sweeping changes to the company or there's going to be a takeover eventually there
have been some discussions about the price point that he would have to buy the company based off
of the share price but either way the investors like the idea of it because it means changes to
the company and the way things have been going you really need changes just a couple weeks later in
October Gamestop Stock (GME Stock) and Microsoft Stock (MSFT Stock) announced a multi-year
partnership and I’m still kind of baffled to why Microsoft Stock (MSFT Stock) really did
this so in the deal Gamestop Stock (GME Stock) we'll use Microsoft Stock (MSFT Stock)'s tech
devices and software in their stores and we'll be pushing additional Xbox products in exchange
Gamestop Stock (GME Stock) will get a percentage of all digital sales from consoles bought at the
physical Gamestop Stock (GME Stock) locations and so this is huge because as I mentioned the
switch that we've been seeing in the gaming market has been the switch to digital transactions and
this has really suffocated Gamestop Stock (GME Stock) because this is not a means
that they're able to sell their products and so while we don't know exactly what
the numbers of this deal are I’m going to put that graphic back up from 2018
this is a huge deal for Gamestop Stock (GME Stock) and so this was one of the reasons why the stock
price shot up significantly and then the most recent news was just this past week was Ryan
Cohen upped his stake to 13% and then Gamestop Stock (GME Stock) shot up 30% from that news.
I want to talk about something that has been pushing Gamestop Stock (GME Stock) up
a pretty good amount in the past couple months and it is yes the positivity from the news but
one of the most interesting parts of investing in the stock market in 2020 has been the influence
of wall street bets and so the wall street bets are wsb is a subreddit that I’ve been following
for a couple years now as a lurker just because I do enjoy investing in the stock market and I
like seeing people that take maybe more risky positions and have huge payouts so the idea of
wall street bets is that most people are taking huge gambles on buying options with very short
expiration dates way out of the money to try to get huge profits and so it's very
common to see people posting how they've lost most of their account in just a couple trades
or it's common to see like this guy that made more than a thousand percent gain in a single year
and then you have the other group of people on wall street bets which includes myself called
theta gang the idea behind theta gang is that you're selling the options to these people that
are willing to pay you know ridiculous uh premiums for pretty much worthless options and so someone
like myself I love the wheel strategy and the reason behind it is I’m able to pocket premiums
reliably and I’m not going to have that you know a thousand percent increase in
my portfolio in a single year but I’m not going to blow up my account so
those are the two people that are kind of competing for profits on wall street bets but
this is a subreddit that commonly rallies behind very volatile stocks and I’m going to be talking
about more of these stocks later on this week but Gamestop Stock (GME Stock) has been one of
the top dogs recently I found this website that categorizes each post made on wall street bets
and a bullish or bearish sentiment based off of the words that they use and then ranks them by
popularity and here's the graphic for what that looks like right now and as you can see wall
street bets is a very bullish group of people wall street bets is unified around the goal of waiting
out the short sellers on Gamestop Stock (GME Stock) currently shorting stock means that you
borrow the shares of a company from your broker with the expectation that you'll pay them back in
the future with the same shares of that company plus a little bit of interest and so the broker
just wants the shares back eventually it doesn't matter what price you give it back to them at
the whole point is you want to borrow the shares from your broker sell them for cash and
then eventually buy them back at a later date at a lower price and you're able to keep the difference
in those two prices but the idea is that you can't hold on to these shares forever because it is the
expectation that you're going to have to give them back you're paying extra money to your broker for
owning these shares and if it's going the wrong direction you're not going to hold this forever
and so this is a very important distinction between buying puts and shorting a stock say I
buy a fifteen dollar put on Gamestop Stock (GME Stock) and the stock tanks down to ten dollars
that put means that I’m able to sell it to someone for fifteen dollars instead of the ten dollars
that it's available on the overall market but the distinction between the two of them is that if say
Gamestop Stock (GME Stock) stays high I don't have to sell at 15 if I don't want to it wouldn't make
sense for me to sell my shares below the current market price and so the distinction is with a
short seller you're required to buy those shares back eventually whereas if the stock continues to
go up and I bought my put I can just let it expire worthless and nothing happens and so the result of
this is that you're eventually going to have to close out your position and buy those shares back
and if a lot of people do that at a single time it results in a short squeeze which is what the
people on wall street bets are trying to wait for at this point so usually just an example b person
a goes out to close out their position has to buy the shares back that stock gets pushed up
in price because the buying pressure increases person b sees that they're losing out on more
money and does the same thing it's usually a rush to try to get out of your position
as the stock price increases rapidly and normally we see like a 20 30 40 percent move because
depending on how big the short interest is on a stock it can be in a very aggressive move
and so as you can see right now the short interest on Gamestop Stock (GME Stock) is pretty high
and it's been that way for a long time meaning that a short squeeze is likely going to happen
eventually as the stock price continues to go up and so we've seen a couple of short squeezes
this year the most famous being with Tesla Stock (TSLA Stock) Tesla Stock (TSLA Stock) was one of
the most shorted stocks of all time and this year with its meteoric rise being up over 600 percent
at this point Tesla Stock (TSLA Stock) short sellers have lost more money than the entire
airline industry which is crazy to think about so it's going to be very interesting to watch I
do have a position on Gamestop Stock (GME Stock) right now and I will share that in my video this
week talking about my current portfolio but now I want to make a bull and a bear case for
Gamestop Stock (GME Stock) because I think it's important to hear both sides of the argument
I am going to start with the bowl case because I think that's what most people want to hear
and the biggest thing for the short term has to do with momentum this is a stock that's been on
a tear and a short squeeze is looking more and more likely the higher the price increases over
time given that potential of a short squeeze the upside potential for the short term is crazy I’ve
seen some people saying that the upside is like 40 dollars I’ve been seeing that sometimes the
upside is 60 and so there's a lot of positive for a short term potential also especially since we're
getting towards the end of the year I think it's pretty likely that we're going to see this happen
potentially by the end of the week as some people that are shorting the stock may try to close out
their positions to take the tax loss as that is a very interesting strategy that people
are trying to minimize their tax bill and for a stock like game stop that has been going up for
the past couple months there's probably a lot of people that are sitting on some huge losses there
another bold case comes from the history of Gamestop Stock (GME Stock) here's a graphic that
overlays the release of each of the video game consoles over the past decade plus any time that
a major console has been released the stock price is shot up and now that we've recently had the
release of the new Xbox and the ps5 it's possible that we're going to see a very similar thing
and then the final bull case that I can think of is that wall street bets is a powerful group
even though many people don't really want to acknowledge it they all trade in the
same direction even though it's not a massive amount of money that each person is trading with
it's the sheer number of people and the fact that they're all trading in the same direction
when I say that the trend is your friend the direction of people trading is also a trend
that you need to take advantage of and kind of follow and so since all these people are
very bullish on Gamestop Stock (GME Stock) that is a major force it is kind of like
the equivalent of a mutual fund being bullish on a stock put all the money together it might
not reach the same amount of money for each transaction that we see with a mutual fund but
it is a huge amount of money it's all going in the same direction so next I want to talk about
the bear cases and the first and main one is that Gamestop Stock (GME Stock) is still in a really
tough spot the news from Ryan Cohen wanting to compete with amazon is a really cute idea
but I don't see it as being very close to being an actual thing at this point they still have over 5
500 locations and that's way too much considering the physical retailers are really struggling
digital is the future and that graphic that I showed about sales from the digital means
meaning that Gamestop Stock (GME Stock) is getting less and less of each of the actual
video game sales in this industry that's going to explode with the recent release of these new
generation consoles and while the Xbox deal sounds great I don't think it's going to be as great as
maybe some people kind of expect it to be it is sure going to be a positive for the company but
we really don't know the numbers yet and I don't think it's going to be enough to save the company
Xbox was lagging in the last console cycle and here's how console sales have been looking in
the past couple years with Xbox really lagging behind Nintendo and Sony in the last generation so
we don't know the numbers for the next generation Xbox but it's going to be interesting to see how
it looks because that deal with Xbox sounds great but we really don't know the numbers behind it
and then finally I don't like the management group when it comes to Gamestop Stock (GME Stock) he's
been a company that's never really been innovative they had the opportunity to buy
twitch the streaming service but they backed out of it and amazon ended up buying it and
they're going to have to reinvent themselves if they want to survive Ryan Cohen makes that look
possible with his track record with e-commerce with Chewy Stock (CHWY Stock) but it's still a
huge challenge and there's a lot of hurdles to go through and probably a lot of growing
pains to make this a successful long-term investment so overall there's some bullish
cases or some bearish cases for the short term I’m pretty bullish long-term decently bearish
and I will talk about the position that I took this morning on Gamestop Stock (GME Stock) it's
going to be a very short position it's going to expire in three days uh but yeah I thought
this was an interesting topic I wanted to talk about the power of wall street bets
talk about Gamestop Stock (GME Stock) the examples that we've seen with the momentum being pushed by
wall street bets with an example like Tesla Stock (TSLA Stock) and the short sellers
because I think this was a very interesting narrative and I’m very curious to see what's
going to happen at Gamestop Stock (GME Stock) in the upcoming months maybe as the momentum finally
slows down so thanks for watching I appreciate all the support and I will see you in the next video