GameStop (GME) pushed further to the upside on Friday after two more insiders loaded up on what was once known only as a “meme stock.”
GME’s lead independent director, Alain Attal, bought 10,000 shares of the gaming merchandise retailer this week while another one of its directors, Larry Cheng, increase his stake by 5,000 shares.
Their filings follow Ryan Cohen’s purchase of about half a million GameStop shares last week. In total, the retail stock has rallied more than 10% over the past five sessions.
Why Are Insiders Buying GameStop Stock?
Insiders have been increasing exposure to GME ever since it announced plans of using corporate cash to buy the world’s largest cryptocurrency by market cap, Bitcoin (BTCUSD).
Their growing stakes in the gaming products company may be indicative of their confidence in its ability to replicate the success that MicroStrategy (MSTR) has achieved with a similar BTC strategy.
MSTR has seen its stock price rally nearly 20-fold since it started buying Bitcoin in August 2020.
The possibility of a similar surge in GME stock now that GameStop plans on adding BTC to its balance sheet is what has been driving investors, including insiders, to its shares in recent session.
GME Shares Remain High-Risk Investments
Despite its new Bitcoin strategy, GameStop remains a high-risk investment for two key reasons.
One, there’s no guarantee that investors will receive its crypto venture as well as they did MSTR’s. In fact, instead of betting on GME, many of them may prefer sticking to MicroStrategy as it’s a time-tested alternative to investing in Bitcoin.
Two, the company’s core business remains under siege. Demand for physical game sales, a key component of GameStop’s business, is eroding as gamers continue to switch to digital downloads and cloud gaming.
And that reflects clearly in GME’s financials. In its latest reported quarter, the gaming merchandise retailer saw its revenue come in down 28% on a year-over-year basis.
Wall Street Rates GameStop at ‘Strong Sell’
Wall Street analysts recommend keeping away from GameStop stock as well.
Barchart tracks one analyst in coverage of GameStop. That analyst has a “Strong Sell” rating and a price target of $13.50, indicating potential downside of nearly 50% from current levels.
