GameStop (GME) Rebounds After Analyst Upgrades

GameStop Corp. (GME) shares rose more than 10% during Monday's session amid bullish reports on video game sales and a pair of analyst upgrades.

Jefferies upgraded GameStop stock to Buy with a price target of $8.00 per share, citing an asymmetric reward potential in the near term. Analyst Stephanie Wissink believes that new console launches will lead to new hardware sales, trade-in inventory, and high-margin pre-owned sales, along with sales of peripherals and accessories. In addition to Jefferies, Telsey Advisory Group upgraded GameStop to Outperform with a $10.00 price target.

The analyst upgrades come as NPD Group reported a 37% year-over-year increase in video game sales to $3.33 billion in August. With the COVID-19 pandemic keeping many at home, video games have become a go-to for consumer entertainment. In addition to GameStop, shares of Turtle Beach Corporation (HEAR), an accessories maker, and Activision Blizzard, Inc. (ATVI), a game developer, have risen following the bullish report.

From a technical standpoint, GameStop stock rebounded from trendline support toward prior highs of around $8.00 over the coming years. The relative strength index (RSI) remains at neutral levels of 59.60, but the moving average convergence divergence (MACD) experienced a bearish crossover. These indicators are sending mixed messages, with trendlines showing a different picture than the MACD indicator, which is trending bearish.

Traders should watch for an ongoing rebound from trendline support to retest highs of around $8.00 over the coming sessions. If the stock breaks out further, it could move toward trendline resistance at $8.25 over the coming sessions. If the stock moves lower, it could retest trendline support at $6.00, while a breakdown from those levels could lead to a move toward the 50-day moving average at $4.95 over the coming sessions.

The Bottom Line

GameStop shares moved sharply higher after a pair of analyst upgrades and a bullish industry report. From a technical standpoint, the stock rebounded from support levels toward its prior highs, but the MACD still paints a bearish picture for the intermediate term.

The author holds no position in the stock(s) mentioned except through passively managed index funds.