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Why GameStop Is Rising While the Market Freaks Out

What happened

Shares of GameStop (NYSE: GME) are up 1% in morning trading Monday, having fought their way back up from a steeper decline earlier on as the Dow Jones Industrial Average is plunging more than 700 points over fears of a rebound in COVID-19 cases.

So what

GameStop opened today higher than where it closed on Friday, but a spooked market sent shares tumbling. It had fallen as low as $161 a share, a better than 4% drop, but has since rallied higher.

Image source: Getty Images.

There's no news specific to GameStop to make it react as it did, but investors may be thinking that a new coronavirus outbreak could signal bullish times again for video game play. The original response to the pandemic was for gamers to flock to GameStop to buy gear, accessories, and hardware.

Now what

Video gaming is booming. Analytics firm Newzoo expects industry revenue to exceed $200 billion by 2024, with half of it coming from mobile gaming.

Because GameStop is transitioning to an online-focused retail experience, it might reap substantial rewards from the industry's move, though it's one of necessity for the retailer if it wants to remain relevant to gamers.

Yet its stores aren't out of the picture either. Nintendo recently came out with a new Switch console whose preorders were quickly sold out while Valve recently introduced Steam Deck, a Switch competitor, whose reservations have also sold out.

GameStop could be the contrarian play over new pandemic fears.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.


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