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1 Stock To Buy, 1 To Dump When Markets Open: Tesla, GameStop

By Investing.com (Jesse Cohen/Investing.com)Stock MarketsDec 13, 2020 07:16AM ET
www.investing.com/analysis/1-stock-to-buy-1-to-dump-when-markets-open-tesla-gamestop-200547721
1 Stock To Buy, 1 To Dump When Markets Open: Tesla, GameStop
By Investing.com (Jesse Cohen/Investing.com)   |  Dec 13, 2020 07:16AM ET
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Stocks fell on Friday to wrap up a losing week, but Wall Street’s major indices remained near their recent record highs amid ongoing optimism over COVID-19 vaccine progress.

Both the Dow and S&P 500 posted their first weekly declines in three weeks, losing 0.6% and 1%, respectively. The tech-heavy NASDAQ suffered a loss of 0.7% over that time frame, however the Russell 2000 scored its sixth straight weekly gain, rising 1%.

INDU:SPX:RUT:COMPQ Weekly
INDU:SPX:RUT:COMPQ Weekly

Investors will be watching fresh COVID-19 vaccine headlines as well as developments surrounding the pandemic in the week ahead.

Markets will also be paying close attention to the outcome of the Federal Reserve’s all-important policy meeting on Wednesday. There is also key November retail sales data, as well as the latest batch of Markit Purchase Manager Indexes and regional Fed surveys due in the week ahead.

Regardless of which direction the market goes, below we highlight one stock likely to be in demand in the coming days and another which could see additional losses.

Stock To Buy: Tesla 

The moment Tesla (NASDAQ:TSLA) bulls have been waiting for has finally arrived. The Elon Musk-led electric vehicle company will replace real-estate investment trust Apartment Investment & Management Co. (NYSE:AIV), or AIMCO, in the S&P 500 when it joins the benchmark index after the close on Friday, December 18.

Tesla will also join the S&P 100, replacing Occidental Petroleum (NYSE:OXY), to become the largest stock ever added to the index.

With a market cap of roughly $580 billion, the electric automaker will be the sixth most valuable company in the S&P 500, trailing only Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Google-parent Alphabet (NASDAQ:GOOGL).

TSLA shares have skyrocketed this year, soaring 629% to a reach a series of new all-time highs in recent weeks. The stock closed at $609.99 on Friday, not far from its record peak of $653.88 reached on Dec. 9.

TSLA Weekly
TSLA Weekly

While changes to the benchmark index are usually a non-event, individual and institutional investors pounced on the news, sending Tesla shares up 49.5% since its inclusion in the S&P was first announced on November 16.

And the party could only be getting started. In a sign that bodes well for Tesla, 14 of the 15 stocks that have been added to the S&P 500 so far this year have seen their share price move higher since joining the index, including Paycom (NYSE:PAYC), Etsy (NASDAQ:ETSY), Teradyne (NASDAQ:TER), and Carrier Global (NYSE:CARR).

There are currently over $11.2 trillion in assets benchmarked to the S&P 500, with roughly $4.6 trillion of the total in indexed funds, meaning significant portfolio adjustments will have to be made to accommodate Tesla.

According to Howard Silverblatt, S&P Dow Jones Indices senior index analyst, that could result in $80 billion worth of Tesla shares having to be bought by index investors.

Despite strong gains and lofty valuations, we anticipate the bump in demand resulting from its S&P 500 index inclusion will likely push TSLA stock even higher in the coming week.

Stock To Dump: GameStop

GameStop (NYSE:GME), whose stock ended at $13.31 on Friday, suffered its worst week since late October, tumbling more than 21%, as investors rushed for the exits following the release of disappointing quarterly financial results.The steep weekly decline saw shares trim their strong gains for the year, with GME stock now up 118.9% year-to-date.

At current levels, GameStop shares are now 31.4% below their recent peak of $19.42 reached on Nov. 30, which was their highest since January 2018.

GME Weekly
GME Weekly

The Grapevine, Texas-based videogame retailer reported a sharp drop in third quarter net profit last week due to the negative impact of pandemic-led store closures and growing competition from digital-game sellers.

GameStop announced a loss of $0.53 per share, widening from a loss of $0.49 per share in the year-ago period. Revenue meanwhile tumbled 30% year-over-year to $1.0 billion, falling short of estimates for sales of $1.09 billion.

Comparable same-store-sales plunged 24.6% from the same quarter a year earlier, worse than expectations for a decline of 20.5%.

"Our third quarter results were in-line with our muted expectations and reflected operating during the last few months of a seven-year console cycle and a global pandemic, which pressured sales and earnings," GameStop Chief Executive George Sherman said in a statement.

Besides the alarming drop in top-and-bottom line numbers, investors aggressively sold off the stock after the company said it would consider raising capital through a shelf-registration and prospectus supplement, which would allow it to sell stock through at-the-market offerings.

The stock offering—essentially the opposite of the share buyback program called for by some big-name activist investors—is likely to dilute the value of existing shares.

Taking this into consideration, GME shares look set to remain under additional pressure in the coming days as it struggles to cope with the surging popularity of videogame streaming and increasing digital downloads of new PlayStation 5 (NYSE:SNE) and Xbox Series X (NASDAQ:MSFT) console games.

1 Stock To Buy, 1 To Dump When Markets Open: Tesla, GameStop
 

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1 Stock To Buy, 1 To Dump When Markets Open: Tesla, GameStop

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Comments (25)
David Lousada
David Lousada Dec 30, 2020 10:06PM ET
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common Sense says this didnt age well done, keep us entertained with these articles and your James Bond photo but thats it
Robert Brenenstuhl
Robert Brenenstuhl Dec 16, 2020 4:24PM ET
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Terrible advice. Buy Gamestop, short tesla. Infinity short squeeze to the moon. Long squeeze to the doom. Ones an inverse bubble the other is an actual bubble. You'll be wrong on both predictions and lose a lot of money if you follow this terrible advice.
Jan Skilbrei
Jan Skilbrei Dec 16, 2020 7:00AM ET
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common sense says it's risky at these highs (Tesla), very late unless very short time horizon
Brad Smith
Brad Smith Dec 15, 2020 2:26PM ET
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Jesse, thank you for your insights into these picks. GME has been one of the weaker gaming retailers for a long time. They have failed to adapt to digital competitors such as Steam in addition to digital downloads for PS5 and XBOX.
TJ Usher
TJ Usher Dec 15, 2020 12:01PM ET
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kol
James Waicekauskas
James Waicekauskas Dec 14, 2020 7:29AM ET
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Got it. Sell TSLA && buy GME.
Mark Wight
Mark Wight Dec 14, 2020 7:29AM ET
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How did that work out for you?;)
James Waicekauskas
James Waicekauskas Dec 14, 2020 7:29AM ET
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TSLA DOWN 1% ,, GME UP 9%...
Mark Wight
Mark Wight Dec 14, 2020 7:29AM ET
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Today, yes, but he was talking about market open on monday when GME went down 8% before it found its bottom and TSLA was up about 7%.
Jon Lovbacka
Jon Lovbacka Dec 14, 2020 4:10AM ET
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Tesla P/E over 1200 and still a buy-recommendation. Absolute insanity but who knows at this stage.
Jonathan Calvo Benitez
Jonathan Calvo Benitez Dec 14, 2020 4:10AM ET
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nothing make sense anymore
Jonathan Calvo Benitez
Jonathan Calvo Benitez Dec 14, 2020 4:10AM ET
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nothing make sense anymore
zumin zhang
zumin zhang Dec 14, 2020 3:45AM ET
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Jesse is reliable guy; better be humble and listen to him
Rajiv Gupta
Rajiv Gupta Dec 14, 2020 2:14AM ET
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So buy whats up and sell whats down because i believe in trends and market inefficiency today. Tomorrow i’ll believe in mean reversion and market efficiency - so wil recommend to sell airbnb and buy hertz :p
Nathan Surrell
Nathan Surrell Dec 13, 2020 10:15PM ET
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get a different job bro . tell people to buy tesla now go back to school
Thom Miller
Thom Miller Dec 13, 2020 9:28PM ET
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Tesla?? Laughing out loud!! For that price they better not start falling apart after 3 months...
Jay West
Jay West Dec 13, 2020 7:06PM ET
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Late to the party on Tesla. Will stay flat or selloff to $550. Smart money and fund managers have already made moves in pre market and after hours. Bears will make good money this week.
Michael John Catbagan
Michael John Catbagan Dec 13, 2020 7:06PM ET
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Keep trying.
Steven Jacobs
Steven Jacobs Dec 13, 2020 7:06PM ET
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Jay you sound scared, and if your still short TSLA and not learned you lesson you’re about to get spanked even more this week. You stay short and I’ll stay long loser
jonathan tran
jonathan tran Dec 13, 2020 3:16PM ET
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You mean sell tesla and buy gme?
Luwi Mngadi
Luwi Mngadi Dec 13, 2020 3:16PM ET
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other way round bro
AST Thomas
AST Thomas Dec 13, 2020 2:45PM ET
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someone is stuck will a tesla in red :-/
Zong Wu
Zong Wu Dec 13, 2020 1:08PM ET
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Top may be already in? https://twitter.com/august92618/status/1337531035949518848?s=21
Billy Bilnaad
Billy Bilnaad Dec 13, 2020 1:07PM ET
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Wouldnt touch Tesla tbh
SJ Song
SJ Song Dec 13, 2020 12:28PM ET
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Agree with you on TSLA but your chart of GME shows otherwise; it’s ready to break out of the resistance line.
chad gray
chad gray Dec 13, 2020 12:28PM ET
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I agree the decline is due to osborne effect, people anticipating ps5 and now that ots available it will shoot up, at least earnings
Peter Meyer
Peter Meyer Dec 13, 2020 12:28PM ET
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chad gray  Can be a quick free cash call with q4 earnings
Ramesh Meghpara
Ramesh Meghpara Dec 13, 2020 12:25PM ET
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Nio
Glenn Morvan
Glenn Morvan Dec 13, 2020 12:00PM ET
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Tesla stock rised a lot in last month based on S&P500 news. the actual entry on dec. 18 will not make it rise much more on the short term imo.
Chopin Liszt
Chopin Liszt Dec 13, 2020 11:45AM ET
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tesla good entering at 550. not now lmao....
Vinayak Tripathi
Vinayak Tripathi Dec 13, 2020 11:45AM ET
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can u please give me some Investing strategy please sir
Phil Kimmel
Phil Kimmel Dec 13, 2020 11:32AM ET
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Those that bet against tesla have been losers!
Fran Karažija
MrkiMedo Dec 13, 2020 11:21AM ET
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Probably this analyst wants to create some liquidity so someone he works for can dump tesla and buy gme lmao
Cesar Va
ElmerHomero Dec 13, 2020 11:19AM ET
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Any Analyst that recommend to buy TSLA lose credibility
Peter Meyer
Peter Meyer Dec 13, 2020 11:15AM ET
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No way. I am short tsla and have a huge stake in GME. No way this is right
Dom Black
Dom Black Dec 13, 2020 11:04AM ET
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don't have
 
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