Why GameStop Shares Topped the Charts

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of GameStop (NYSE: GME  ) moved up to the next level today, climbing as much as 18% after beating analyst estimates and posting strong guidance in its earnings report.

So what: The video game retailer delivered a per-share profit of $0.09, ahead of expectations of $0.04. Revenue actually dropped 11% to $1.38 billion, but that edged out estimates at $1.37. Still, the real excitement seemed to come from GameStop's guidance, which it lifted on hopes for new Xbox and PlayStation consoles due out in November. The company now sees profits of $0.50 to $0.55 per share for the current quarter, and a full-year EPS of $3.00 to $3.20. GameStop President Tony Bartel was especially confident in the company's long-term prospects with the new systems coming out, saying, "We really believe we are at the starting line of a very long line of growth quarters."

Now what: GameStop shares have now tripled over the past year as the company has bucked expectations of its impending decline after sales fell 7% last year. The retailer presents an interesting question for investors, as it dominates video game retail with 6,000 stores around the world, but the industry figures to be fraught with risk as advances in technology seem to be chipping away at the need for traditional console/cartridge gaming systems. Over the long haul, GameStop may not be the best bet, but this holiday season certainly looks like it's shaping up to be a promising one for the retailer.

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