We recently published a list of Jim Cramer’s Top 10 Must-Watch Stocks for Savvy Investors. In this article, we are going to take a look at where GameStop Corp. (NYSE:GME) stands against Jim Cramer’s must-watch stocks for savvy investors.
Friday Madness
In a recent episode of Mad Money, Jim Cramer described September 6, Friday, as a dismal trading day following a critical non-farm payrolls report. Bulls hoped for weaker-than-expected hiring and steady wages to prompt the Federal Reserve to consider cutting rates. They got what they wished for, but this led to a surprising turn of events: instead of rallying, the market saw a sharp decline, with the Dow falling 410 points, the S&P dropping 1.73%, and the NASDAQ plummeting 2.55%.
“What an ugly day. Just hideous. We came into today knowing we’d have a critical non-farm payrolls report. If you were a bull, you wanted to see weaker-than-expected hiring with wages pretty much in line, because that’s what the Fed needs to see before it can start cutting rates. Voila, we got exactly what we wished for. Maybe we should have been careful, though, because as soon as we got what we wanted, the bulls vanished and the sellers came out of the woodwork, crushing practically everything. The Dow fell 410 points, the S&P plunged 1.73%, and the NASDAQ plummeted 2.55%.”
Cramer noted that September often brings significant profit-taking, making it historically the weakest month for the market. While this might seem like circular reasoning, it’s more plausible than suggesting that fear of a severe economic slowdown drives the sell-off. In fact, big tech companies, which are central to ongoing powerful trends like data centers and accelerated computing, should be seen as buying opportunities during market dips.
“This market has a September problem. Come September, we’re always hit with a tremendous amount of profit-taking, which is why it’s the weakest month of the year. I know that’s somewhat circular reasoning—we sell because we’ve always sold—but it makes more sense than saying people sold tech because they fear a hard landing. Tech, especially big tech, is something you buy, not sell, into weakness if you’re worried about a more severe slowdown.
Why? Well, because big tech is all about powerful secular themes that can keep going even during a recession—and we’re not getting one. I’m talking about the data center, accelerated computing—they’re not going anywhere. Nevertheless, when anything jars the big tech themes of the moment, the market’s reaction is swift, harsh, and horrible.”
Jim Cramer discussed the aftermath of NVIDIA’s recent report, noting that despite his belief that AI is not a bubble, the stocks related to AI have seen substantial gains, particularly in August. He pointed out that September often triggers increased selling, even when companies report results that meet expectations.
“Look at what happened after the company reported last night. I don’t believe AI is a bubble, but these stocks are still up a great deal, especially in August. And September tends to bring out sellers when you get just in-line numbers.”
The Upcoming Debate Between Harris and Trump
Jim Cramer also commented on the upcoming debate between Vice President Harris and former President Trump, scheduled for Tuesday night. He questioned how much the economy will be a focus, speculating that Trump might try to link Harris to recent inflation trends, while Harris may present herself as a more moderate alternative to President Biden.
“Tuesday night’s the great debate between Vice President Harris and former President Trump. I don’t know how much of a role the economy will play in the debate. If Trump’s on his game, he’ll try to tie Harris to the inflation we’ve experienced since COVID. I suspect that Harris will try to portray herself as more moderate than President Biden.
Either way, I doubt there’ll be anything specifically market-moving, even if the candidates say something newsworthy about their tax plans. Keep in mind that the winner in November likely won’t have the Senate votes to totally rework the tax code, whether we’re talking about Harris’s capital gains tax or Trump’s 19th-century-style tariffs.”
Jim Cramer Urges Investors: “Please Do Not Give Up the Ship Here”
Then he discussed the upcoming release of the Consumer Price Index (CPI) on Wednesday, which will provide another update on inflation. He emphasized that if inflation remains steady or decreases, the Federal Reserve will have more flexibility to lower interest rates and potentially avoid a recession, addressing concerns from many sellers. Cramer urged investors to stay confident and not to abandon their positions based on these uncertainties.
“Wednesday, we get another read on inflation—this time from the Consumer Price Index. What can I say? As long as inflation stays the same or goes lower, the Fed has plenty of leeway to cut interest rates and prevent a recession—the thing so many sellers are worried about. That’s why I keep telling you, please do not give up the ship here.”
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A gamer playing a game on one of the specialty retail company’s gaming platforms.
GameStop Corp. (NYSE:GME)
Number of Hedge Fund Investors: 12
Last Friday, GameStop Corp. (NYSE:GME) saw a boost in its share price after Keith Gill, known as “Roaring Kitty,” posted a picture of “Toy Story” on X. Despite the buzz, Jim Cramer points out that GameStop Corp. (NYSE:GME), the original meme stock, frequently creates high expectations that don’t always materialize into meaningful results, such as earnings-per-share growth. Cramer suggests that GameStop Corp. (NYSE:GME) needs to present a solid long-term business strategy, or its quarterly report might once again fall short of expectations.
“Tuesday, GameStop reports, and that always seems to stir up animal spirits. In fact, GameStop Corp.(NYSE:GME) shares popped today after Keith Gill, aka “Roaring Kitty,” posted a picture of “Toy Story” on X. Yeah, seriously. The original meme stock always seems to have a lot of promise but never translates into anything real—like earnings-per-share growth. It’s time for the company to reveal a long-term business plan, or the quarter will just land with a thud again.”
GameStop Corp. (NYSE:GME) is currently facing financial challenges, as reflected in its recent performance and future projections. GameStop Corp. (NYSE:GME)’s Q2 2024 earnings report, due on September 10, 2024, is expected to reveal a significant drop in revenue to $900 million, compared to $1.16 billion a year earlier. Comparable store sales are predicted to decline by 23%, and GameStop Corp. (NYSE:GME) is forecasted to post a net loss of about $5.3 million, which is worse than the $2.8 million loss from the same quarter last year but an improvement from the $32.3 million loss in Q1 2024.
These issues are part of a broader trend affecting the retail sector, where consumers are cutting back on spending on non-essential items like video games. Despite these difficulties, GameStop Corp.(NYSE:GME) is trying to revitalize its brand by converting some stores into retro gaming locations that focus on older gaming consoles. This move could attract nostalgic customers and offer a new revenue stream.
GameStop Corp. (NYSE:GME)’s stock, which has risen by over 25% this year, shows some investor optimism despite the underlying problems. A bullish view would suggest that if GameStop Corp. (NYSE:GME) can successfully tap into the retro gaming trend and improve its operations, there could be potential for a turnaround. GameStop Corp. (NYSE:GME)’s history of volatility and its appeal to speculative investors might also contribute to future gains, provided the company can overcome its current financial challenges.
Overall GME ranks 10th on our list of Jim Cramer’s must-watch stocks for savvy investors. While we acknowledge the potential of GME as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GME but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
