What happened
Shares of video game retailer GameStop (GME +0.86%) continued its incredible run on Wednesday, climbing as much as 93.7% in morning trading. By midday, shares had settled slightly and were "only" up 63.2% at 12:55 p.m. EST.
So what
The biggest reason for GameStop's rise this week was a Monday announcement of holiday sales and new board members. Holiday quarter sales rose 4.8% on a comparable-store basis and e-commerce sales jumped 308%. Management didn't give guidance for the full quarter, but did say it expected comparable-store sales and profits to rise in the fourth quarter of fiscal 2020.
Image source: Getty Images.
Also on Monday, GameStop announced three new directors with e-commerce and technology experience. This was part of an agreement with RC Ventures, the company's largest stockholder, to expand the board of directors from 10 members to 13.
The performance, particularly in online sales, reinforces management's move to put more people with e-commerce experience in leadership positions. GameStop clearly has an opportunity to grow its business as a new generation of consoles reaches the market and it has new reasons to interact with consumers. And that bullish outlook is what the market is reacting to today.
Now what
For years, console and video game makers have been transitioning to digital sales of products rather than disks or cartridges. And in theory that should hurt GameStop's business. But the company has become a go-to location to get the hottest video game items and can add in accessories for gamers as well. If it's successful in becoming the go-to place for gamers online, this stock run could continue. But after more than doubling in the last three days I am wary of a pullback in this hot video game retailer because the hype could end as quickly as it came.
