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Why GameStop Stock Is Bounding Higher Today

The Motley Fool logo The Motley Fool 1/3/2022 Rich Duprey

What happened

Shares of GameStop (NYSE: GME) are starting off the new year on the right foot, launching out of the gate with a 3.9% gain in morning trading Monday. The video game retailer was one of the top five performing stocks in all the market in 2021, with a 687% gain, but it has been trending mostly lower over the past three months.

Most of GameStop's gains, of course, came from the meme stock trading frenzy in January and February of last year, but its stock has defied the expectations of many analysts who didn't believe it could sustain its valuation over time.

An adult and child play a video game together. © Getty Images An adult and child play a video game together.

So what

While there is no specific news to account for GameStop's jump this morning, the video game retailer is continuing to implement its vision of transforming into an online business that can better meet the needs of gamers who are increasingly moving to digital gaming.

Part of the problem for Wall Street has been the tight-lipped policy of management in explaining exactly what it will do to effect the change it desperately needs. Its last earnings report underwhelmed the market as performance continued to decline with no evident results of its plan.


Video: Stocks will surge to new highs next year, Oppenheimer predicts (CNBC)

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Now what

Volatility will continue to be the watchword for GameStop and other meme stocks, which tend to trade more on internet chatter than the fundamentals of the business. Yet the pandemic showed GameStop was still the go-to place, and because the retailer saw a 1,500% increase in online traffic during the lockdown, it indicated there was hope for it to successfully make the transition to becoming "the Amazon of video games."

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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