GameStop's venture into cryptos and NFTs through a new marketplace for players will land the video game retailer in a popular place: the metaverse, according to Anthony Georgiades, co-founder of Pastel Network.
The metaverse is the next cutting-edge technology, which brings together the real and virtual worlds. It lets people interact with other people face to face without actually being there. That's why companies small and large from every industry are racing to be part of it, including GameStop.
"My guess is that eventually, GameStop will follow Samsung and others and launch a store within the metaverse," explained Georgiades. "Gaming is all about creating a persona, a life, and a goal in a whole new world that you immerse yourself in. Why can't video-game purchasing be the same? NFTs are the first step in the direction of the metaverse, and will likely push GameStop to consider opening up a store or purchasing land in the metaverse to best serve its customers."
But GameStop is a traditional retailer with stores around the country. So what role will they play in the company's transition to the metaverse?
"GameStop's physical stores also represent a potentially powerful link between physical and augmented reality," said Reeve Collins, a pioneer in digital marketing and the bitcoin/blockchain space. "If their NFT marketplace connects easily with in-person items at their retail locations, GameStop could offer developers and creators an easy way to connect their current products with the digital space. For example, console manufacturers could expand their physical offerings with unique or exclusive digital items designed to enhance the video game experience."
That sounds like a fascinating business venture for tech enthusiasts, but what does it mean for traders and investors?
For traders, GameStop's announcement added fuel to the hype for the stock, which shot up close to 20% on Friday morning following the announcement of its NFTs venture on late Thursday afternoon. But the hype didn't last, with gains fading by Friday's market close.
For investors, GameStop's new venture is pie in the sky. The road to the metaverse is long, with many bumps and twists, which will make the trip a risky venture. Only a few adventurers can survive and reach the final destination.
"Nowadays, even though NFTs are a powerful technology, everyone hurries to develop something while it is still trending, exactly like other powerful technologies in the past," said Diogo Abreu, head of Marketing Qudio.io. "It may be utilized with the greatest and worst intentions, much like the dot-com bubble, and when it bursts, the better projects, the ones that truly add value to the community, will survive."
Will GameStop be one of them? Alexander V., who is an investor, trader and founder of daytradingz.com, doesn't think so.
"While GameStop's announcement is well received by market participants at market open, it's not to be expected that [the euphoria] will hold in the midterm before seeing real results and profitability of this expansion into new markets," he said. "This is because multiple competitors have already established a footprint in this sector or announced [it will] do so. One of the most popular ones is Coinbase Global Inc. [NASDAQ: COIN]. They announced the Coinbase NFT market on Oct. 12, 2021, leading to a short-term price per share rally from $250 to $368.90 in the highs. Meanwhile, the price per share consolidated back to $235. Keep in mind that Coinbase has an EPS [ttm] of 9.79, while GME is still unprofitable with an EPS [ttm] of -2.02."
That's why he doesn't see GameStop's new venture having any lasting effect on the company's shares that could push them to new highs.
"A short squeeze might add some fuel to the movement, but it's not likely that it will initiate another rally to all-time highs as it did in 2021," he added.
Robert R. Johnson, professor of finance at Heider College of Business of Creighton University, thinks GameStop is the sum of two bubbles, the Reddit mob and crypto assets.
"When I learned that GameStop was going into NFTs, I had to chuckle. But, upon reflection, it makes sense that a firm with an obsolete business model and a cult-like following would venture into the absurd world of NFTs to attract more naive speculators," he said. "As a speculative vehicle, GameStop stock is attractive to many because of the volatility. This announcement sent the stock price soaring. With GME we see the combination of two bubbles — the Reddit mob and crypto assets. This likely won't end well, particularly in a rising interest-rate environment that will put pressure on equity valuations throughout the market."
That's what eventually happens with every bubble and the Reddit-crypto bubble won't be an exception to the rule.