The GameStop stock price has crashed this year, despite the company’s diversification into Bitcoin accumulation. GME was trading at $22.3, down by nearly 40% from its highest point this year. This article explores the top three reasons why it has tumbled.
Why GME Stock Has Crashed
GameStop stock price has plunged because of the ongoing lack of traction of Bitcoin treasury companies. A closer look reveals that most of these stocks, including MSTR, American Bitcoin, and Metaplanet, have plunged this year.
GameStop has become a major Bitcoin holder, having bought 4,710 coins, which are currently valued at over $520 million. It did that to deploy its excess capital and probably replicate MicroStrategy’s success.
This was likely a good idea because GME has one of the best balance sheets in retail, with billions of dollars in cash and no debt.
GME stock price has also crashed as more investors have shorted the company. Data shows that its short interest has soared from 6.20% in January to 15.15% today. This means that the portion of its stock that has been sold short has continued to increase, a sign that more investors expect the shares to fall.
On the positive side, the rising short interest raises the possibility that the company will go through a short-squeeze as it has done in the past.
Furthermore, GME stock price has also fallen as its core business weakened. The most recent results showed that its sales dropped to $732 million in Q1, down from $881 million in the same period last year. On the positive side, its profit jumped to $44.8 million.
GameStop’s business will likely continue to deteriorate as demand for physical video games and consoles wanes. Analysts expect that its results next week will show that its revenue rose by 3% in Q2 to $823 million. Its annual revenue is expected to drop 8% to $3.52 billion.
GameStop Stock Price Analysis
The daily timeframe chart shows that the GME share price has plunged from a high of $35.80 in May to $22.37 today. It has slumped below the 50-day and 200-day moving averages.
The stock has also formed a bearish flag pattern, which comprises a vertical line and a horizontal channel. Therefore, the most likely scenario is that the GameStop stock price will crash and possibly reach the psychological point of $20.
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