GameStop’s 400% Rally in 2021 Smashes Wall Street Price Targets

GameStop Corp. is up more than 400% this year. To see how far the game retailer has outrun anyone’s ability to render sensible analysis, consider what its current dizzying rally has done to Wall Street’s best guesses of its value.

Now perched close to $100 a share, hoisted by a short squeeze ignited and arguably organized in chat rooms, the stock is about $83 above the average forecast of equity handicappers tracked by Bloomberg. The ratio between the two is by far the biggest in the Russell 3000 and jumped for a third day, as crazed trading capped a stretch in which the 37-year-old company burned bears who had shorted 139% of its shares.

It’s happening in a stock that before 2020 had fallen six straight years as earnings shrunk, and which isn’t projected to turn a profit before fiscal 2023. While fundamentals may one day matter again, GameStop has now become the latest show of force by newbie day traders in a market that seems more like their plaything each day.

The stock surged as much as 145% to $159.18 on Monday, at one point triggering at least six trading halts. It traded at $98.22 just before noon in New York.

“It doesn’t make business sense,” said Doug Clinton, co-founder of Loup Ventures. “It makes sense from an investor psychology standpoint. I think there’s a tendency where there is heavy retail interest for those types of traders to think about stocks differently than institutional investors in terms of what they’re willing to pay.”

GameStop's share price has left its analyst target price far behind

Right now, they’re willing to pay 657% more than what analysts consider reasonable, on average. While perhaps fairly priced relative to its annual sales of about $5.2 billion in the 12 months through October, those sales are down 40% in just two years. The company is expected to report a per-share loss in both fiscal 2021 and 2022. To get a price-earnings multiple it’s necessary to look two years into the future, where the P/E is around 58.

Bears have seen more than $6.1 billion mark-to-market losses this year, according to financial analytics firm S3 Partners.

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