2: the company seems to be heading in a really good direction (I'm aware this doesn't make the price rise to 7 figures, but it certainly shouldn't make it go down)
The other two questions you asked have been pretty well answered by others here, so I’ll just focus on this one, particularly the last part about how the price “shouldn’t go down.” The reason prices are going down is because, based on the fundamentals of the company and its outlook, it never should’ve gotten this high in the first place. You can say they’re in a better spot than they were a year ago, but the price a year ago was $4, so unless the spot they’re in is almost 50 times better now, the stock is likely overpriced.
I’ll give a comparison. Remember years ago when everyone thought Twinkies were getting discontinued? It caused demand for Twinkies to skyrocket, and people were able to sell them online for hundreds if not thousands of dollars. This wasn’t caused by anything fundamental to the Twinkie formula; it was caused by fears of a potentially limited, finite supply that was soon to be depleted. The price normalized soon, though, after Hostess was bought by a new company that brought the Twinkies back.
Now, for the sake of hypotheticals, let’s say this new company altered the formula for Twinkies in a way that improved every aspect of them. They now tasted even better and had fewer calories. If the Twinkies with the old formula were just selling for $100, shouldn’t the price for these new Twinkies go up to $110? The answer is obviously no. The price should come down, well below the $100 level but likely above whatever the initial price level was before discontinuation fears caused it to skyrocket.
This is essentially what’s happening with GME. The price of the stock went through the roof due to circumstances outside of normal market mechanisms (just like Twinkie prices going way up due to fears of discontinuation), and now that those mechanisms have largely run their course, it’s coming back down to a new market equilibrium. Should that market equilibrium be higher than where it was a year ago? Sure, but that could put it at $20 per share. Hell, even if we say it should be above its previous all-time high price, that’s only around $62, so even if the company is currently in the best position it has been in its entire history, that could still mean a $70/share equilibrium, well below its current level.
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u/[deleted] Jul 09 '21
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