GameStop surges as massive short squeeze rolls on

Yahoo Finance's Ines Ferre joined Yahoo Finance to discuss GameStop's recent surge and the reason behind it.

Video Transcript

SEANA SMITH: But we want to get to one huge mover today, and that is GameStop. We had shares jumping-- the stock was halted in earlier trading after surging-- get this-- more than 140%. It's come back just a little bit, but we want to get to Ines Ferre, who's been following this for us. And Ines, lots of talk just about the retail investor, how exactly that's playing into all this. But gains like we saw in GameStop, especially earlier this morning, is certainly something that you don't see too often.

INES FERRE: Well, this is unbelievable what we've seen with this stock. I mean, you had a day high of $159 and a day low of $61. As you mentioned, it went up more than 140%. Then, it did back briefly into red territory before going back into the green. And this stock in July of last year was trading around $4 a share.

And what we've seen with this movement is so much volatility over the last week, but also even before because you had shares hovering at around $20 right around January 12th. And it has been just on a wild ride over the last several weeks.

Now, Telsey advisors took away their only outperform rating on the stock, double downgrading it today to underperform, purely based on valuation with a price target of $33. That's actually a Street high because Credit Suisse has a price target of $3.50 cents on this stock. So right now, this stock has four holds and four sells.

We did talk to some analysts. We talked to Anthony Chukumba from Louis Capital. He said, look, if you want to gamble, go to the casinos. He's talking, of course, about retail investors and what's been happening, that clash that we've seen with Reddit users, Wall Street bets with short sellers.

I mean, what you're seeing on the stock is a massive crush on short sellers. And he said in his more than 20 years on Wall Street, he has never seen something like this before. We also reached out to--

ADAM SHAPIRO: Hey, Ines?

INES FERRE: Yeah.

ADAM SHAPIRO: Let's talk about that. The short interest on this stock was tremendous. And there's been pressure, though-- it's almost as if we're seeing a reverse of this. How serious is this, perhaps somebody manipulating? And at the end of this, someone always gets hurt.

INES FERRE: Yeah. I mean, this is not necessarily something that's going-- there's folks out there that are predicting, of course, that this was going to end badly. So S3, which is the data firm that looks at shorts, talked to us earlier this morning. They basically said that they've seen what's called this massive short squeeze by older shorts. But then you have some of the new ones that are coming in in hopes of this pullback. So that's why you saw that big rise up to more than 140% earlier this morning.

And also, they gave this great quote, basically saying, much like the Revolutionary War, the first line of troops goes down in a rain of musket fire but is replaced by the troops next in line. So you've got shorts, but then you've got other shorts right behind them.

Now, Brian Shannon, I know, spoke with Jared Blikre last Friday about these shorts and basically warning-- he's a veteran trader-- and basically warning, wait until the stock starts to break down before you go into it, because of course shorts go in. Then, they have to cover. Then, the stock goes higher. But he's saying, wait on that because you want to wait until it breaks down.

SEANA SMITH: All right. Ines Ferre. Thanks so much for bringing us the latest on GameStop. Again, shares up still pretty significantly but well off their highs of the day.