2021 is coming to an end, and for traders, it will mostly be remembered as a year when retail traders jumped into rising stocks, fueling even further gains.
The original “meme stock” trade is that of retail game company GameStop (GME). Some see the company as a struggling dinosaur, especially after the company reported its most recent earnings. However, a read beyond the headline earnings numbers suggest that the company, which is still up substantially this year, has further upside.
The company has been expanding its online sales, has sidestepped supply chain issues by building inventories, and income is up 39 percent in the past year with profit margins up 56 percent and earnings per share up 50 percent.
With the company cash rich from issuing more shares at high prices this year, the company looks set to move into the digital age. That’s especially true given the latest earnings call discussing the rise of NFT projects tied into gaming.
Action to take: Investors may like shares, given the turnaround in the company underway, even if some are still skeptical about a move higher. Shares don’t pay a dividend at present, whether in cash or in a digital token form as some suspect. But with rising financial metrics across the board, shares could still surprise to the upside.
For traders, the past few quarters have seen the stock decline into earnings season before moving higher. The recent drop in shares looks like an ideal time for a call option trade. The February $190 call, last going for about $19.00, offer a leveraged way to play a likely quarterly cycle higher.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.