Please ensure Javascript is enabled for purposes of website accessibility

Why GameStop Stock Soared 67% in August

By Demitri Kalogeropoulos – Sep 2, 2020 at 10:03AM

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

The retailer has attracted a significant new shareholder.

What happened

GameStop (GME 1.23%) shares far outpaced a booming market last month, soaring 67% compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That sharp move higher pushed the specialty retailer's stock into positive territory year to date after having declined by more than 50% earlier in 2020.

Two kids sitting in between a coffee table and a couch holding video game controllers and smiling

Image source: Getty Images.

So what

The rally, which has continued into early September, came following news that a large institutional investor is actively buying the stock and has already accumulated nearly 10% of GameStop's outstanding shares. The stock's jump was likely amplified by short-sellers closing their positions, which can create a large price spike known as a "short squeeze."

Now what

The new shareholder may use its influence to agitate for a management shake-up, but that's not a sure bet. In the meantime, investors will be watching GameStop's upcoming earnings report, which is set for Sept. 9. That announcement should show improving -- but still sharply negative -- sales trends in the fiscal second quarter.

GameStop is aiming to stay profitable in fiscal 2020, which would be an impressive achievement given widespread temporary store closures tied to the COVID-19 pandemic. The bigger question is whether the retailer can return to a consistent growth profile as consumers reduce shopping trips and the stampede toward digital game purchasing continues.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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 Stock Quote
GameStop
GME
$25.60 (1.23%) $0.31

*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
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

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.