Gaming the System: How GameStop Stock Surged 1,500% In Nine Months

An anonymous reader quotes a report from Ars Technica: Nine months ago, GameStop stock bottomed out at $2.80 a share, a reflection of the myriad problems facing the retailer specifically and brick-and-mortar game retail as a whole. As of Tuesday morning, though, that stock price is hovering around $40 a share (peaking at $44.74 as of this writing), with the vast majority of those gains coming in the last couple of weeks.

Is GameStop really worth up to 16 times as much as it was back in April? Is the company's ambitious turnaround plan finally (and suddenly) turning things around? Is GameStop roaring its way back to the nearly $10 billion market cap it enjoyed at the height of the Wii phenomenon? Probably not. Analysts suggest the recent surge in GameStop's stock price is the result of a massive short squeeze bubble that will pop eventually. But beyond the sky-high valuations of recent weeks, analysts also suggest there's some reason to believe GameStop's long-term health is more robust than last year's stock doldrums suggest. Investor Ryan Cohen, best known as the founder of pet food superstore Chewy.com, bought in to a roughly 10 percent ownership stake in the retailer back in August. 'Since August, Cohen has bought even more GameStop shares, and he and two former Chewy executives have been named to the company's board of directors,' reports Ars. 'That gives Cohen, along with fellow activist investors from Hestia, the potential capability to steer the company in a new direction.'

'There's nothing wrong with GameStop,' says Wedbush Morgan analyst Michael Pachter, who has a target price of $16 for GameStop stock. 'I'm absolutely convinced they're going to thrive and survive. They don't have net debt, so they're not going bankrupt or anything. And with the new console launch, they're probably going to sell a lot of consoles and be fine.' As long as there's demand for new and used physical games, there will be demand for GameStop, suggests Pachter.

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