What happened
GameStop (GME 0.26%) shareholders trounced a rising market this week. The stock jumped 57% through Thursday trading compared to a 1.3% rally in the S&P 500, according to data provided by S&P Global Market Intelligence.
The surge easily reversed losses from a week ago and pushed returns slightly ahead of the wider market for the year. GameStop is down roughly 4% in 2022 compared to a 5% drop in the S&P 500.
NYSE: GME
Key Data Points
Shares jumped on renewed investor enthusiasm about better earnings results on the way.
So what
GameStop's meme stock status means it attracts more volatility than its retailing peers. But this week's movement was also powered by news of notable stock purchases by an insider. Influential investor Ryan Cohen, who sits on GameStop's board of directors and is the founder and former CEO of Chewy, purchased more GameStop shares.
Image source: Getty Images.
Cohen is known for pushing retailers toward more of an e-commerce footing, which could unlock faster growth for the video game specialist.
GameStop hasn't succeeded yet on this score. Sales barely rose in the holiday season quarter, in fact, compared to the 2019 period before the pandemic struck. And GameStop posted a significant loss in that critical quarter despite high demand for new gaming consoles.
Now what
GameStop remains a highly risky stock that could easily post quick losses on the order of the 60% spike shareholders saw this week. Management in mid-March wasn't comfortable issuing even a short-term growth or earnings outlook, citing the early stage of its transformation process.
Executives are hoping the company has a brighter future ahead in areas like e-commerce, non-fungible tokens, and blockchain gaming. But its results to date simply show shrinking sales and mounting losses. That's why investors should look to more successful companies if they seek exposure to retailing stocks.
