Why GameStop Stock Failed To Settle Above $225 Today

Vladimir Zernov
Published: Jun 22, 2021, 15:41 UTC

The stock made an attempt to settle above $225 but lost momentum and declined towards $210.


In this article:

GameStop Gains Ground After Company Completes “At-The-Market” Equity Offering Program

Shares of GameStop gained upside momentum after the company announced that it had completed its “at-the-market” equity offering program.

On June 9, the company announced that it would sell up to 5 million shares of its common stock through an at-the-market offering. The stock has immediately found itself under pressure and moved from the $300 level towards the $200 level.

As it turns out, GameStop actively sold its shares and has already completed the program. The company stated that its gross proceeds from the “at-the-market” program totaled $1.126 billion, so GameStop sold its shares at an average price of $225.2 per share.

GameStop stated that the proceeds from the offering will be used for general corporate purposes and investment in growth initiatives.

What’s Next For GameStop Stock?

GameStop stock moved higher after the announcement about the end of the “at-the-market” equity offering program as traders bet that selling pressure will decrease, and the stock will be ready to gain upside momentum.

However, I’d note that the stock has already pulled back from recent highs which were close to GameStop’s average selling price in the “at-the-market” equity offering program. The key risk for GameStop bulls is that market participants will view the $225 level as a “ceiling” since the company has readily sold its shares at this price.

I’d also note that analyst earnings estimates for GameStop have improved in recent weeks. Currently, analysts expect that GameStop will report a loss of $0.31 per share this year. In the next year, the company is projected to report a profit of $0.15 per share.

At the current stock price of about $212, the stock is trading at 1413 forward P/E. While the company’s valuation remains disconnected from reality, GameStop’s near-term dynamics will depend on whether the stock will be able to get above the key $225 level. If the stock fails to settle above this level in the upcoming trading sessions, it may find itself under more pressure.

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About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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