In a recent warning to traders, a Wall Street veteran has compared trading GameStop Corp. GME stock to gambling, urging investors to approach the situation with caution.
What Happened: Veteran New York Stock Exchange floor trader Peter Tuchman cautioned traders about the risks associated with the GameStop stock, particularly for inexperienced traders who may be left in a precarious position, reported Yahoo Finance.
“It’s irresponsible for the newcomer into the market to think that this [GameStop trading activity] is anything else except gambling,” Tuchman said.
He emphasized that many young traders who had previously invested in GameStop during the first meme stock debacle are now repeating the same mistake, potentially landing themselves in trouble.
Tuchman, known for his 40 years of trading experience, including during significant market events like Black Monday and the Great Recession, highlighted the speculative nature of GameStop’s stock from a fundamental perspective. The company’s first-quarter sales plummeted by 29% year-on-year and reported a loss of $32.3 million.
GameStop remains heavily reliant on gaming consoles, which account for 56.8% of its sales. The company also maintains a large physical store base of 4,169 locations, despite the industry’s shift towards digital retail.
GameStop’s stock has experienced significant volatility, dropping 52% from its June 6 high of $66. However, the company’s CEO, Ryan Cohen, has utilized this renewed trader interest to raise additional capital, selling 75 million new shares and raising $2.1 billion.
“GameStop stopped making sense from a business perspective a while ago,” retail expert and investor Jeff Macke said. “They’re packed away in the mall where … the newsstand used to be and the shoe polish guy.”
Why It Matters: The warning from Tuchman comes amid ongoing volatility in GameStop’s stock. The company’s shares have been the subject of intense speculation and trading activity, driven in part by the actions of influential figures like Keith Gill, who has been a vocal supporter of GameStop stock.
Despite the warnings, GameStop’s stock continues to attract significant attention from traders. The stock’s recent performance has been a topic of interest, with its chart illustrating a key trading lesson and its journey from meme stock to a multimillion-dollar investment capturing headlines.
Price Action: GameStop Corp closed at $24.93 on Tuesday, marking a gain of 5.41% for the day. In after-hours trading, the stock dipped 0.92%. Year to date, GameStop has shown significant growth, rising by 49.55%, according to data from Benzinga Pro.
Image made via photos on Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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