What Happened:
Shares of video game retailer GameStop (NYSE:GME) jumped 119% in the morning session after meme stocks soared (AMC Entertainment (NYSE:AMC) +14%, Newegg Commerce (NASDAQ:NEGG) +14%, Beyond (NYSE:BYON) +14%). Gamestop's stock rally also coincided with the return of the famous Wall Street Bets (Reddit stock trading forum) trader Keith Gill (known online as Roaring Kitty) to Twitter (also known as X.com) after three years. The moves likely point to the growing interest of retail investors in the stock market.
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What is the market telling us:
GameStop's shares are very volatile and over the last year have had 38 moves greater than 5%. But moves this big are very rare even for GameStop and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was about 2 months ago, when the stock dropped 19.9% on the news that the company reported fourth-quarter results with revenue unfortunately falling short of analysts' expectations, driven by significant underperformance in its software segment ($465m of revenue vs. estimates of $670m). Because the company's software products have higher profit margins than its hardware products, it missed Wall Street's estimates on nearly every profitability metric. The company also didn't provide any guidance and said it would not host a conference call to discuss the results, which raises an eyebrow. Overall, this was a bad quarter for GameStop.
GameStop is up 82.7% since the beginning of the year. Investors who bought $1,000 worth of GameStop's shares 5 years ago would now be looking at an investment worth $14,746.
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