GameStop (NYSE: GME) 8-day gain swells to over 400%

Shares of GameStop Corp (NYSE: GME), a Texas-headquartered video game retailer, have been a raging run for the last couple of weeks. The share prices has already posted a gain of more than 200 per cent in just seven trading sessions. Surprisingly, the stock of GameStop Corp rallied nearly 52 per cent in the pre-open session on Monday, 25 January, indicating a much higher start. However they pared gains, still ended higher by over 18 per cent at $76.79.

Shares flying like a rocket

According to the data available with the New York Stock Exchange, the stock of GameStop registered an all-time high of $159.18 on Monday.

Barring Monday’s sharp appreciation in the share prices, the market price of GameStop has already advanced 225.86 per cent to $65.01 (22 January) from a share price level of $19.95 as on 12 January. The stock of GameStop has effectively surged a little over 406 per cent in the last eight days.

(Source - © Kalkine Group 2020)

2,222% gain from Covid lows

The invariable surge in the share prices of GameStop has been largely fuelled by the unforeseen demand for the video games following the stay-at-home advisory by the government to contain the spread of Covid-19 infection. During the fallout of coronavirus cases, the stock of GameStop touched a yearly closing bottom of $2.80 per share hitting at least a 15-year low of $2.57.

From the yearly closing lows, the stock has multiplied exceptionally. At the previous closing price of $65.01, the stock of GameStop stands with a cumulative gain of approximately 2,222% from the multi-year closing low of $2.80.

Recent earnings

Earlier this month, GameStop reported a 309 per cent rise in e-commerce worldwide sales for the nine-week holiday period ended 2 January. However, the total sales of GameStop slipped 3.1 per cent steered by the 11 per cent decrease in the store count due to the decision of de-densifying in-line with the prescribed government orders on the back of Covid-19 pandemic.

GameStop posted a 4.8 per cent increase in total comparable store sales with a sequential growth of 29.6 per cent from Q3 FY20. Notably, the e-commerce sales jumped 309 per cent, representing 34 per cent of the net sales, to $1.35 billion, exceeding the company’s estimate of $1 billion.

Mixed views

GameStop has nearly 70 million shares outstanding in the open market with 240 institutional shareholders on the board including the likes of FMR LLC, BlackRock Inc, and Vanguard Inc. With a relatively lower number of outstanding shares, the prospective rise and fall can be due to a definitive number of big-ticket traders.

Analysts and experts, of course, are divided over the stock of GameStop with some favouring the rise and others disapproving the unexpected gains due to apparent mismatch in the fundamentals and valuation. A section of market participants believes that the present market price of GameStop shares is not going to sustain in the near future, while some argue that they won’t be selling the stock before it touches the $1,000-mark.