According to BofA, stimulus checks are unlikely to trigger another GameStop mania
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The $ 1,400 stimulus checks hit Americans’ bank accounts, but Bank of America doesn’t expect the tax aid to spur speculative trading in GameStop stock.
Since the GameStop retail frenzy in January, the Wall Street company’s predictive analytics team hasn’t been monitoring fundamental factors in the gaming retailer’s inventory.
Bank of America checked the number of Reddit conversations regarding GameStop trading volume and short interest, which is closely related to the retailer’s surge in trading stocks.
More recently, the bank has started overseeing Reddit discussions about the stimulus checks. The company concluded that it doesn’t expect a repeat of GameStop’s epic rise and fall due to the added cash to consumer wallets in the future.
“Conservative incentives appear to have peaked and GME stocks have been falling for the past few days,” Curtis Nagle, data analytics analyst for Bank of America, told clients.
“The number of recent conversations involving both GME and stimulus is low. GME trading volume is also steadily declining and short interest has dropped significantly,” he added.
In January, an epic short squeeze in GameStop stock shocked Wall Street, drawing attention to a rising class of retail investors on social media platforms.
GameStop’s share price rose to $ 483 per share and then lost 90% of its value. The controversy drew the attention of Wall Street and Washington.
As part of a $ 1.9 trillion stimulus package, millions of Americans will receive $ 1,400 in direct payments for Covid-19 relief. The data showed that the final round of stimulus checks in 2020 was sometimes used for trading stocks. However, Bank of America believes GameStop is largely a thing of the past.
The stock was up 98% in March, but trading volume is only a fraction of what it was in January.
GameStop is reporting wins on Tuesday March 23rd. Bank of America expects the quarter to be less than encouraging given the previously announced, very disappointing Christmas sales results.
“GME is expecting ‘profitability’ for the quarter, which is not exactly a high bar as comp sales will be positive and the fourth quarter typically represents the bulk of GME’s earnings for the year,” said Nagel.
According to Bank of America, GameStop’s stock has had a positive impact on new developments for the company over the past five months, such as a digital revenue-sharing agreement with Microsoft, the appointment of Chewy founder Ryan Cohen to GameStop’s board of directors and a focus on GameStop’s technology and e-commerce transition.
“All of this is theoretically positive for GME, but details of the cost, timing, strategic issues and impact of a turnaround plan on results have not yet been given,” added Nagel.
– with reports from Michael Bloom of CNBC.