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What's next for GameStop shares following after-hours price surge?

The GameStop share price surge continues to defy short-sellers’ predictions as it topped $209 in after-hours trading. The question is now: how long will the pump last, and what influence does this really have on the stock markets?

We are currently seeing increased volatility in certain stocks, including GameStop and AMC. This increases the risk of sudden, large or rapid loss and the potential for gaps, where stocks fall dramatically when the market opens. Please note that IG does not offer options on GameStop or AMC Entertainment, or the ability to short these stocks.

GameStop share price up over 90%

  • Will the surge continue throughout 2021?
  • Are we in a new era of social media led price pumps?

Shares in GameStop (GME.N) have surged this week, with prices up by over 90%. The unprecedented surge was helped during after-hours trading on Tuesday 26 January, when a tweet from Elon Musk sent GameStop shares into overdrive.

Elon Musk pushes GameStop shares higher

The after-hours pump pushed up the GameStop share price by 41% to $209, following its $147 close on 26 January. While long-term holders are enjoying the ride, the question analysts are asking now is how long can it last? We’ve seen social media-inspired pumps before, particularly where Musk is concerned. However, is the latest rush a flash-in-the-pan, or the dawn of a new era in trading?

After heightened activity and reactive buzz surrounding GameStop stocks, the company saw their shares skyrocket, a stark contrast to the steadily declining prices they’ve been seeing over the last few years.

Since reaching $68 a share, GameStop had failed to gain a significant amount of traction. Shares did rally in 2014 and remained moderately high until 2017. However, from that point onwards, it was downhill.

By mid-2020 GameStop shares were trading at less than $4. In this respect, the current surge looks unsustainable. However, it’s important not to ignore the upward trend witnessed at the end of 2020. Although the price chart looked nothing like it does now, shares were bullish. By November, shares were above $11 and, at the close of the year, they’d surpassed the $20 mark.

Is the popularity of after-hours trading here to stay?

After the recent surge, it’s hard for many investors to interpret whether this spike in activity will be a one-off, or regular occurrence. Moreover, whether the increase in after-hours activity is itself an aspect of the market that is here to stay.

GameStop was a rising entity heading into 2021. Even though retail sales were hit by COVID-19 restrictions, online sales were up. This shift was fuelling the bull run and, while it may not have led to recent events, it’s a sign the company was moving in the right direction. So, is the activity surrounding this relatively small company a marker of big changes to come? Moreover, will after-hours trading continue to be utilised for more major outlets?

What does the future hold for GameStop?

Indeed, even now we could see shares in AMC Entertainment (AMC.N) enjoying a similar rush thanks to online communities. The feeling among many analysts is that GameStop’s current bull run will end when the hype falls away. However, the impact this last trading week has had can’t be forgotten.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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