There are a variety of factors behind this move. For one, the stock was left for dead as video game sales were increasingly moving away from retail outlets online. This led to a deterioration in results, buildup of bearish sentiment, and high levels of short interest. Of course, these issues were magnified during the coronavirus crash when companies with poor financials suffered the most especially for companies reliant on retail sales.
However, the company has defied expectations. Due to new consoles from Microsoft
New Board Member
GameStop's challenge remains formidable. The company will have to craft a new strategy especially as video games are increasingly becoming more like Software-as-a-Service products rather than physical products sold at retail outlets.
One reason for optimism is the company adding former Chewy
Cohen was successful with Chewy because he was able to compete on prices but also connect with pet owners similar to what Zappos did with shoes. It's expected that Cohen wants position GameStop to serve as a place where gamers' passion is reciprocated and appreciated. Additionally, he could lead efforts to beef up GameStop's online sales channel.
Stock Price Outlook
However, there remains uncertainty about how GameStop will be able to compete with its existential threat - games are likely to be downloaded directly and become more of a DTC product. In this medium, there's no reason for middle-men.
The stock's gains are likely exaggerated by the bull market, strong console sales cycle, new Board members, and short squeeze in certain stocks. From a contrarian perspective, it seems to be an ideal entry on the short side.