GameStop’s stupefying stock rise doesn’t hide its reality

U.S. & World

Pedestrians pass a GameStop store on 14th Street at Union Square, Thursday, Jan. 28, 2021, in the Manhattan borough of New York. Robinhood and other online trading platforms are moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors. GameStop stock has rocketed from below $20 to more than $400 this month as a volunteer army of investors on social media challenged big institutions who has placed market bets that the stock would fall. (AP Photo/John Minchillo)

NEW YORK (AP) — Behind GameStop’s stock surge is the grim reality that the video game retailer is floundering even as the industry around it is booming.

The Texas-based company has been swept up in a battle between big-moneyed hedge funds betting against it and small investors trying to prop it up. That has caused GameStop’s share price to soar despite the shaky financials underneath.

And even though there are some bright spots, like improving holiday sales and the naming of co-founder Chewy to the board, any reinvention will take time and may not work.

Many investors fully understand the contradiction between GameStop’s stock price and its business fundamentals.

But for those who imagine it to be the next Tesla or Amazon, the truth is: It’s likely not.

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