Citron Research editor and notorious short seller Andrew Left joined Benzinga’s ZingerNation Power Hour Thursday to discuss his short thesis on GameStop Corp. GME.
Left has recently criticized the valuations of Palantir Technologies Inc PLTR and a handful of high-flying electric vehicle stocks, such as Nio Inc - ADR NIO and Electrameccanica Vehicles Corp SOLO.
This week, Left has focused his attention on video game retailer GameStop, which appears to be caught in a massive short squeeze. The stock traded higher by 5.9% on Thursday and is now up 131.2% in the past two weeks despite a lack of major news from the company.
Left’s $20 GameStop Target: Left said he expects GameStop to be back down to the $20 level in the near future.
“People just want to buy the stock without even thinking about the business,” Left said.
He said he understands people’s fanaticism surrounding Tesla, Inc. TSLA, but GameStop is completely different.
“For people that were fanatical about Tesla, I got that. It was a great product, changing the world,” Left said.
“But to have a mall-based retailer that’s actually failing, doing poor, trading at all-time highs when it comes to valuation...If you believe they’re going to hit their numbers, they’re trading at next 12 months 42 times EBITDA, and normally it would trade at 4,” he said.
Left said the much more successful Best Buy Co Inc BBY is currently trading at around 8 times forward EBITDA.
“There’s a high short interest for a reason because their business is pretty much in terminal decline. But nobody wants to hear that. They just want to buy, buy, buy.”
Alternative To GameStop: Left understands the appeal of buying stocks with high short interest, but he prefers to invest in highly shorted stocks that have long-term growth trajectories, like Fubotv Inc FUBO.
“GameStop is the opposite," Left said. "So I’m just not understanding why people choose certain stocks to be fanatical about."
He compared the current situation in GameStop to a similar situation in bankrupt Hertz Global Holdings Inc HTCGQ last year. Shares of the heavily-shorted Hertz spiked as high as $6.25 back in June but have since dropped back down to around $1.41.
“If you bought GameStop at $10, $20 or $30, congratulations. But at some point you have to say oh, I’ve got to sell this thing in order to make the money,” Left said.
Benzinga’s Take: Left always takes a lot of criticism for his missed short calls, led by the WallStreetBets community on Reddit, which is decidedly bullish on GameStop. However, Citron’s annual shareholder letter recently revealed Left had a big year in 2020. Citron’s average exposure for the year was 20% long, and the fund generated a net return of 155% on the year.
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