Video game retailer GameStop reports quarterly earnings Tuesday — although “video game retailer” doesn’t really do that company justice anymore.
Over the last five years, GameStop has launched a now-defunct NFT marketplace. (Remember, NFTs are those crypto token things for everything from art to real estate.) GameStop also became an authorized dealer of sports and hobby trading cards and, just last month, it bought about $500 million in bitcoin.
The impetus for those interesting new lines of business was that whole Reddit-driven meme stock craze from January 2021. And that craze is still alive and kicking.
A couple years ago, Michael Pachter, managing director of equity research at Wedbush Securities, sat down at a blackjack table at the Bellagio in Las Vegas, Nevada.
The card dealer told him that she was 65. When Pachter told her he analyzed the stock prices of companies like GameStop for a living, “She actually told me she took out a line of credit on her house of $100,000 to buy Gamestop because her kid told her to,” he said.
Pachter said about 90% of GameStop’s stock is still owned by retail investors — non-professionals who still plumb the depths of Reddit threads for financial advice.
Meanwhile the company’s stock price has dropped more than 60% from it’s 2021 peak.
But even so, Pachter said GameStop wouldn’t have survived this long without investors like that blackjack dealer. Video game players just buy online now.
“GameStop has been declining in sales by double digit percentages every year for about the last seven,” he said.
The big reason the GameStop story really took off was it had a clear villain: hedge funds trying to short the stock.
But Dan Egan, vice president of behavioral finance and investing at online investment manager Betterment, siad he’s not surprised the memestock Reddit threads are still pretty active years later.
“I do think that social media is here to stay, and that is a structural change to how retail investors are going to interact with financial markets,” he said.
Egan thinks we’ll likely see more memestock frenzies in the not too distant future, when a new generation of investors enters the market.
“They’re going to have their own meme stocks, and we’ll talk about the cross generational meme stocks of, ‘Oh, I remember when I was a kid, it was GameStop, and for you, it’s, I dunno, some AI-related companies,’” he said.
It’s unclear whether the actual brick and mortar GameStop stores will still be around by then.
