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Why GameStop Was Jumping Higher Today

By Rich Duprey - Dec 15, 2020 at 3:06PM

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The video game retailer is riding a confluence of good news higher.

What happened

Shares of GameStop ( GME -3.35% ) were jumping 7.5% higher in afternoon trading Tuesday on no news specific to the video game retailer, though the market in general was running higher on COVID-19 vaccine developments.

So what

The prospects of widely available vaccines got a big boost after the Food & Drug Administration said Moderna's ( MRNA -6.96% ) coronavirus therapy is "highly effective" and met all the requirements for emergency use. It follows the approval for use of the vaccine developed by Pfizer ( PFE 1.98% ) and BioNTech ( BNTX -6.72% ).

Family playing video game at home.

Image source: Getty Images.

Vaccines greatly increase the hope the country can open up once more. This is particularly true for retailers that have been operating at minimal capacity requirements. GameStop, which has had to rely heavily upon its digital operations, would also benefit from an economy that was more open.

Now what

An analyst at NPD Group issued a report on Friday that said the video game upgrade cycle had industry sales soaring across the board.

Consumer spending jumped 35% in November, hitting a record $7 billion, with $1.4 billion on hardware alone, up 58% year over year, as the new game systems from Microsoft ( MSFT -1.65% ) and Sony ( SONY -0.55% ) hit the market and quickly sold out in many stores.

With video game spending leaping higher, coupled with good news on the pandemic front, GameStop investors were feeling ebullient.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$195.25 (-3.35%) $-6.76
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$53.44 (1.98%) $1.03
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$331.06 (-1.65%) $-5.57
Sony Corporation Stock Quote
Sony Corporation
SONY
$120.78 (-0.55%) $0.67
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$342.85 (-6.96%) $-25.66
BioNTech SE Stock Quote
BioNTech SE
BNTX
$338.17 (-6.72%) $-24.35

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

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