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Why ARM Holdings, Groupon, and GameStop Jumped Today


Image source: ARM Holdings.

Monday continued where last week left off, with major market benchmarks once again setting new all-time record highs. Gains for the Dow and S&P 500 were modest, ranging from a tenth of a percent for the venerable average to a quarter-percent for the broader index, but investors still reacted favorably to what has thus far been a solid start to earnings season. Gains in technology and financial stocks were especially noteworthy, and with the summer doldrums leading to relatively low activity levels on Wall Street, market participants seemed content to put on hold any fears they have about big-picture macroeconomic issues. Among the best performers on the day were ARM Holdings (NASDAQ: ARMH), Groupon (NASDAQ: GRPN), and GameStop (NYSE: GME).

ARM gets a high-five with its buyout bid

ARM Holdings soared 40% after the chipmaker received a buyout bid from Japanese conglomerate SoftBank. The $32.2 billion agreement will pay ARM shareholders 17 British pounds per London-traded share, which works out to just over $67 per ADR as traded on U.S. markets. Softbank CEO Masayoshi Son focused on the fact that he is confident about the U.K.'s overall economic prospects despite having voted to leave the European Union, and that likely motivated the buyout bid at a time when investors haven't been as comfortable with British stocks. One key benefit for ARM is that it gets a lot of its revenue from international sources, and so its fundamentals will likely look a lot better for as long as the pound remains weak against the U.S. dollar and other major currencies. Some fear that regulatory hurdles might be challenging, but the move only extends SoftBank's worldwide grasp in a number of different areas.

Groupon gets a good deal from analysts

Groupon jumped 10% in the wake of receiving favorable comments from analysts at Piper Jaffray. The company raised its rating on the daily deal and e-commerce marketplace from neutral to overweight, arguing that Groupon's strategy to focus on its most successful product lines and geographical areas should pay off in better results than the company has seen recently. Moves to boost its marketing spending have weighed on Groupon's bottom line, but bullish investors hope that the added exposure will help the company survive and thrive in the long run. With CEO Rich Williams having been in place for less than a year, Groupon still has some time to make good on its revamped strategy to produce growth.

GameStop gets a Pokemon boost

Finally, GameStop gained 8%. The seller of games and consoles has benefited greatly from the success of the new Pokemon Go game, and CEO Paul Raines said that the company has seen sales in some stores double because of the smash hit and GameStop's decision to offer promotions supporting Pokemon-related products. Tapping into demand for collectibles could be a smart move if the Pokemon Go craze lasts for a while, and GameStop desperately needs a catalyst to get more people into its stores. Pokemon Go has the potential to turn into that catalyst in time, and given today's share-price climb, shareholders believe that's exactly what's going to happen.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has the following options: short October 2016 $28 puts on GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.