GME stock and AMC shares retreated Friday as the meme rally appeared set to further pare the week's gains. GameStop tumbled after releasing preliminary Q1 results and announcing plans to sell more stock. Meanwhile, a leading short seller from the 2021 rally is betting against GME stock again. Elsewhere, Robinhood stock jumped on a major upgrade from BofA.
Robinhood Upgraded Times Two
BofA early Friday double upgraded Robinhood shares to buy from underperform, The Fly reported. Analyst Craig Siegenthaler noted that the brokerage's retail engagement peaked in 2021, before declining significantly and troughing in 2023. But BofA has seen a rebound in multiple key metrics, including organic growth and margin loan utilization, as well as year-over-year trading activity and payment order flow. BofA expects the trend to continue through 2026, Siegenthaler wrote. The firm called HOOD's valuation attractive following increases in EPS and earnings before interest, taxes, depreciation and amortization. BofA hiked its price target on HOOD stock to 24 from 14.
Elsewhere, the mobile broker on Tuesday reached $5 billion in equities trading volume, marking one of its largest days in the past 12 months, CEO Vlad Tenev posted on the social media site X.
GameStop Releases Preliminary Results
GameStop on Friday released preliminary results for its first quarter. The video game retailer expects net sales to range from $872 million to $892 million, down from $1.24 billion last year. GameStop sees its net loss for the quarter between $27 million to $37 million, improved from a loss of $50.5 million the year prior. The net income forecast was in-line with FactSet estimates of a $28 million loss, but revenue fell well short of views of $1.045 billion.
GameStop expects cash and equivalents to range from $1.073 billion to $1.093 billion, falling from $1.31 billion in Q1 2023. No reporting has yet been announced.
The company also filed for two separate stock offerings. The first is 45 million shares of common stock, through Jefferies. Proceeds from sales will go to general corporate purposes, which may include acquisitions and investments.
The company also filed a shelf registration statement with the SEC Friday morning. Shelf registrations allow companies to issue more stock to sell at a future date in one more multiple offering rounds.
The filing noted that GameStop's charter allows it to issue up to 1 billion shares of common stock and up to 5 million shares of preferred stock. There were 306.187 million shares of GME common stock outstanding as of May 4.
GameStop said it plans to use the future proceeds from these sales for working capital and general corporate purposes, as well as potentially invest in certificates of deposit (CDs) and U.S. Treasury securities.
Major Short Back In The Saddle
Meanwhile, Andrew Left, founder of short-sale specialist Citron Research, said he had started shorting GME stock again, according to Benzinga. Citron Research's fund took a 100% loss on GameStop during the 2021 short squeeze as meme stock mania reached a peak. Left said he started shorting GME stock this week after shares vaulted following a series of social media posts from Keith Gill, also known by his online username Roaring Kitty.
Gill/Roaring Kitty claimed fame in 2020 and 2021 as one of the key drivers for the GameStop short squeeze. The former financial broker and analyst was eventually called to testify in front of the House Financial Services Committee in February 2021 regarding a probe on potential market manipulation.
Left noted his positions against GameStop this week are much smaller than his bets against the company in 2021. "It's always a good opportunity," he told Benzinga. "By no means, no trader out there would be laying into GameStop."
Left was also vocal about his GME short position three years ago. Many retail traders and Wall Street Bets enthusiasts at the time viewed the 2021 meme rally as an underdog battle against the big Wall Street guns.
Left during the Benzinga interview prodded Gill, noting large hedge funds are still doing well after the 2021 meme rally.
"The big guys are still doing OK," Left said, noting founders of other hedge funds that shorted GameStop in 2021 now own professional sports franchises. "I don't know what boo-boo kitty owns," Left said.
Stock Action
Robinhood shares jumped another 12.2% Friday on the upgrade. HOOD stock surged nearly 23.7% this week and is up 57.6% so far this year.
GME stock tumbled 19.7% Friday, adding to Thursday's s 30% dive. Shares notched third straight daily decline after rocketing to kick off the week.
Thursday's drop put GME stock under its Monday low of $24.77, meaning that traders who bought into this week's meme rally are now underwater. Still, GME stock is up 26.7% in 2024.
Meme stock peer AMC retreated 5.2% Friday after swinging 3.5% higher in early trade. Shares fell 15.3% Thursday. AMC is not too far off its Monday low of 3.16. The stock vaulted 51.2% this week, MarketSurge data shows. But shares are still down more than 28% this year.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
