GameStop Surges 44% After Earnings: Analyst Says Let 'Short Squeeze Begin'

GameStop Corp. GME shares spiked close to 44% in after-hours trading on Tuesday, following the release of its fourth-quarter earnings.

What Happened: “Release the hounds, let the short squeeze begin,” S3 Partners Ihor Dusaniwsky tweeted late Tuesday. He noted that short interest in GameStop — a retailer of video games, consumer electronics and gaming merchandise — is about $946 million, with 56.05 million shares shorted.

See Also: How To Buy GameStop (GME) Stock

The short interest as a percent of the float is 21.79%. The analyst also noted 1.1 million shares of short covering in the stock over the past month. GameStop shorts were down $44 million on Tuesday and down about $313 million in after-market trading. “Expect a wave of short covering tomorrow,” he added.

When asked whether GameStop’s stock price is disconnected from fundamentals, Dusaniwsky said the stock price is not much of a function of what the value or earnings are but is what the Street thinks where the price needs to be.

The analyst also noted that the short interest isn’t nearly as much as was seen a couple of years ago. “It has really calmed down much, but the volatility is there,” he said, adding that this is where the longs and shorts are making/losing money in size on a daily basis,” he said.

“You are still going to see a lot of action on both sides of the trade.”

Cramer Chimes In: CNBC “Mad Money” host Jim Cramer tweeted that GameStop’s quarter will likely cause more covering than this.

He also commented on Nike Inc. NKE, which reported results after the close. The stock fell in after-hours trading and traded down 2.12% in premarket trading on Wednesday, with traders reacting to the not-so-optimistic guidance.

“I am not as anxious about Nike's future as many others,” Cramer said.

Price Action: In premarket trading on Wednesday, GameStop stock jumped 43.80% to $25.38, and Nike fell 1.44% to $123.80, according to Benzinga Pro data.

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