Unless something changes over the remaining seven months of the year, I’m prepared right now to name GameStop (NYSE:GME) the business story of 2021, with GME stock up more than 1,100% year-to-date, remaining stubbornly above $200. 

I don’t know about you, but I continue to be amazed by GameStop’s resilience. Here’s why.

GME Stock Is the Definition of Insanity

That’s precisely what I said about GameStop when I last wrote about the video game retailer at the end of March. It’s gained over $50 since my article was published. The company’s share price is holding up far better than I believed possible. 

“GameStop’s risk-adjusted returns just aren’t delivering the goods. To continue to speculate on GME stock, in my opinion, is the definition of insanity,” I wrote in my March 25 column.  

In that article, I argued that the ratio of GameStop’s up days to down days was about average compared to the S&P 500. And I thought because investors took on far more volatility with GameStop, they needed more up days to make the speculative bet worth it.

Under no circumstances could I see myself recommending GME stock at its current prices. Perhaps if it falls below $150, it would be worth buying. 

What’s New at GameStop 

You know the phrase, “You have to make hay while the sun shines?” Well, that’s precisely what GameStop management did by selling 3.5 million shares of its stock in late April in an at-the-market offering that raised $551 million of gross proceeds at an average price of around $158 a share.

That’s Management 101.

Perhaps more importantly, GameStop used the net proceeds to retire $216.4 million of debt that wasn’t due until 2023. As a result, its balance sheet is now free of long-term debt. 

However, it’s not completely out of the woods.

At the end of January, it had operating lease liabilities totaling $684.1 million. Of those lease payments, $258.2 million or 34% of the amount outstanding are due in 2021 and $168 million or 22% of the amount outstanding are due in 2022.  

Now you could look at GameStop with a glass-half-full perspective and argue that the sooner it gets out of its brick-and-mortar obligations, the sooner it can become a pure play on e-commerce. 

As the host of CNBC’s Mad Money, Jim Cramer, pointed out in mid-May, Ryan Cohen didn’t take over GameStop to run a brick-and-mortar business. He took control to leverage the company’s 20 million rewards members and build a subscription business like that of Chewy (NYSE:CHWY), the online pet food retailer he co-founded. 

Cramer is not wrong. Cohen’s intentions were very clear. 

And now that he’s gotten rid of most of the company’s management, he’s free to do as he pleases to rebuild  GameStop in his vision. 

For example, GameStop just announced that it has leased  700,000 square feet in York, Pennsylvania, where it will operate an expanded fulfillment center to support its e-commerce business. It expects the center to be operational by Q4 2021. 

GameStop’s Problems

The company has a number of problems. 

First, as I mentioned earlier, GameStop has significant lease obligations that dwarf the funds that it raised in April. Bloomberg discussed this subject at the end of April. 

“GameStop, of course, has a major problem that Chewy never did — the financial drag of operating thousands of physical stores — and Cohen is searching for alternative uses for many of the locations he doesn’t opt to shutter. Among the ideas he’s considering: training centers for aspiring esports gamers,” stated Bloomberg contributors Olga Kharif and Anders Melin on April 27. 

Moreover, video games are easily downloadable. So who says someone even brighter than Cohen can’t come along and offer GameStop’s 20 million rewards members video games for lower prices? I think that’s very possible.  

And then there’s Cohen himself. 

Everyone calls this guy an e-commerce genius because of the five-star customer service he instituted at Chewy.com. However, Chewy doesn’t make money, and it never has. In 2020, Chewy lost $92.5 million on $7.1 billion of sales. Cohen stepped down as CEO in March 2018. Chewy lost $268 million during the year that he left. 

I suppose you could say the fact it generated positive free cash flow in 2020 is a sign that economies of scale are gradually taking hold for the company. But I suspect the pandemic had more to do with that. 

Is Ryan Cohen successful? He’s definitely successful. He’s a billionaire. 

But for anyone who thinks he’ll be able to do the same thing for GameStop that he did for Chewy, you’ve got another thing coming. Those two companies have two entirely different products and customer demographics. 

So am I surprised by GameStop’s resilience? You bet I am. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.