Watch Out: Barbarians At The Gate For GameStop (GME)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified GameStop ( GME) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified GameStop as such a stock due to the following factors:

  • GME has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $94.8 million.
  • GME has traded 1.3 million shares today.
  • GME traded in a range 205.2% of the normal price range with a price range of $2.23.
  • GME traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on GME:

GameStop Corp. operates as a video game retailer. The stock currently has a dividend yield of 3.4%. GME has a PE ratio of 12.4. Currently there are 10 analysts that rate GameStop a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for GameStop has been 4.3 million shares per day over the past 30 days. GameStop has a market cap of $4.5 billion and is part of the services sector and retail industry. The stock has a beta of 0.90 and a short float of 36.7% with 14.73 days to cover. Shares are down 21.5% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates GameStop as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 18.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 111.41% and other important driving factors, this stock has surged by 58.50% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GME should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 111.0% when compared to the same quarter one year prior, rising from -$624.30 million to $68.60 million.
  • Net operating cash flow has significantly increased by 80.29% to $680.60 million when compared to the same quarter last year. In addition, GAMESTOP CORP has also vastly surpassed the industry average cash flow growth rate of -19.40%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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