Why GameStop stock is gaining today

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

While GameStop led the meme stock movement a year ago, today it’s gains actually trail that of Bed Bath & Beyond and AMC, indicating that it might not be the focal point of the Wall Street Bets traders that it was early last year. The stock also trailed its meme stock peers on Friday, gaining only 4.3% in the previous session compared to double-digit gains for Bed Bath & Beyond and AMC.

What happened

Shares of GameStop (NYSE: GME) were rising today as part of a broader two-day rally in meme stocks, including AMC Entertainment Holdings (NYSE: AMC) and Bed Bath & Beyond (NASDAQ: BBBY). 

There was no particular news out on the video game retailer today. Instead, traders on Reddit’s WallStreetBets teamed up to push the stock higher in a move reminiscent of GameStop’s massive gains early last January.

As of 2:44 p.m. ET on Monday, the retail stock was up 8.1%.

So what

GameStop traders are trying the same play again. On WallStreetBets, traders are talking up GameStop and piling into the stock after shares have fallen back down to earth after a dramatic run-up last year.

GameStop stock is also not as heavily shorted as it once was. As of July 15, 22% of the float is sold short, meaning a substantial (but not overwhelming) percentage of investors are betting on the stock to fall.

Now what

Ironically, GameStop’s meme bounce is coming at the same time as a sector slowdown in gaming. The NPD Group reported that consumer spending on video gaming fell 13% in the second quarter, and today, NVIDIA (NASDAQ: NVDA) stock fell after the chipmaker issued a disappointing second-quarter forecast due to a shortfall in gaming revenue. The video gaming industry was a big winner from the pandemic, so those headwinds are only natural as the pandemic effects fade.

GameStop stock rallied last year in part because Chewy Inc. (NYSE: CHWY) co-founder Ryan Cohen had begun accumulating a stake in the company, and he later joined the board, pushing the company to move deeper into e-commerce and areas like non-fungible tokens (NFTs). Though GameStop posted modest revenue growth in its most recent quarter, the company’s losses actually widened, casting doubt on any potential turnaround.

While the stock could continue to rally with help from the WallStreetBets crowd, the fundamental case seems thin at this point.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why GameStop stock is gaining today appeared first on The Motley Fool Australia.

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Jeremy Bowman has no position in any of the stocks mentioned.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Chewy, Inc. and Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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