GameStop Makes Wild Run As Skepticism Builds

For a company so threatened by a transition to virtual video games, GameStop (NYSE:GME) had done an impressive job of growing its value. Shares gained 11 percent on the week amid rampant bearish speculation, while GameStop continued to defy the odds and land “buy” ratings from analysts. With word on the latest Xbox from Microsoft (NASDAQ:MSFT) putting favorable winds at the company’s back, it might see its good fortune continue.

The 12-month run for GameStop is one of fantastic proportions. Stock prices have gained 93 percent since June of last year, with half of the rise taking place this year. One of its lifelines was threatened, however, by the specter of a world without hard-copy video game discs. Would Microsoft’s new Xbox squeeze out used games and dent the business model of GameStop? The company outlined the policy of the new Xbox One in a Friday post.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Instead of banning second-hand games, users would be able to play what they want, resell games, and otherwise act freely. However, there are hints the game publishers could change the way things happen in the future. For now, GameStop’s reselling can continue apace, ensuring that more than $1 billion in revenue will continue coming the company’s way. Stock prices rallied after the news, but bears were certainly acting out on GameStop this week.

Caitlin Duffy noted in Forbes that bearish options were very popular for GameStop traders on Friday. Short activity is always one of the forces working behind GameStop, as investors don’t believe the company’s business model will hold. By mid-summer, analysts will be able to tell whether or not they’re right.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Until then, GameStop will wait and see how Sony (NYSE:SNE) handles the used game issue in its new PlayStation consoles. Analysts still believe the company has life. SunTrust recently held its “buy” rating for GameStop and put its price projection at $44. With GameStop still south of $37, many believe it can make its 52-week run a full 100 percent improvement. Considering how GameStop has defied expectations in the past, it’s not out of the question.

Don’t Miss: Apple’s E-Book Deals: Just Business As Usual?