Please ensure Javascript is enabled for purposes of website accessibility

Why GameStop Stock Jumped 7% Today

By Rich Smith – Sep 23, 2019 at 6:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An analyst report today suggests GameStop isn't entirely a lost cause.

What happened

Shares of GameStop (GME 1.91%) stock leapt more than 10% in early trading Monday, before retracing to close the day up a still respectable 6.6%. That may seem a strange way for investors reacting at a time when most stories on GameStop's Google news feed continue to harp on the company's plans to close almost 200 stores in the run-up to the Christmas shopping season.  

But that's not the reason GameStop is up.

Man in suit supporting a red arrow tilting up

Image source: Getty Images.

So what

So what is the reason? Turns out that this morning, a shop by the name of Placer.ai, which bills itself as providing "unprecedented visibility into consumer foot traffic," put out a positive note on GameStop.  

As Placer.ai explained, "2019 has been tough for the retailer GameStop, which had weaker than expected Q2 earnings." Nonetheless, "Placer.ai found hope in GameStop's Q3," noting that "looking at average daily visits in July and August compared to the Q3 2018 average shows an increase of 3.8% in 2019" and adding that "Placer.ai believes this data shows that the company still possesses the brand equity necessary to drive a transformation."

Now what

But if it plans to do effect such a transformation, it had better act fast.

Sales last quarter declined a dramatic 14%, and GameStop lost more money than analysts expected. In fact, over the past 12 months, GameStop has now racked up $1.1 billion in losses, and while free cash flow remains positive, that metric, too, looks to be on the cusp of turning negative. Compared with the nearly $500 billion in positive cash profits GameStop was raking in annually as recently as 2015, the past year has seen GameStop collect just $13.5 million.

Time is running out for this once powerful consumer brand.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of GameStop. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$25.61 (1.91%) $0.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.