Analyst Targets New Lows for This Video Game Retailer

GME gapped lower in January on crushed M&A hopes

The shares of GameStop Corp. (NYSE:GME) are sharply lower today, down 6.1% to trade at $10.80. BofA-Merrill Lynch downgraded the video game retailer to "underpeform" from "neutral," while slashing its price target to $9 from $12. The analyst in coverage anticipates deteriorating fundamentals as the industry shifts to streaming.

GameStop stock earlier fell to a nearly 14-year low of $10.77. GME gapped lower in late January after the company was unable to agree to financing terms with any potential buyers. From there, the shares consolidated below the $12 level, and have now extended their 12-month deficit to 29%.

Today's bear note lines up with the general analyst sentiment. Of the seven brokerages covering GME, six rate it a "hold" or "strong sell," while its consensus 12-month price target of $12 sits just above last night's closing perch of $11.59.

Short sellers have been piling on, too. Short interest increased by 8.7% in the last two reporting periods, and the 32.92 million shares sold short represents a whopping 33% of GME's total available float, and 11.8 times the average daily trading volume.

In the options pits, GameStop sports a Schaeffer's put/call open interest ratio (SOIR) of 1.52. This ratio is in the 84th percentile of its annual range, suggesting near-term options traders have rarely been more put-biased in the past year. The April 13 put is home to peak open interest of 33,500 contracts, and it looks like at least some of these puts have been bought to open.