Please ensure Javascript is enabled for purposes of website accessibility

Why GameStop Shares Jumped Monday

By Howard Smith - Mar 8, 2021 at 10:32AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The meme stock actually had some fundamental news to report today.

What happened

The euphoria around video game retailer GameStop (GME -3.56%) stock had died down after the late-January surge of over 1,500% brought on by Reddit forum WallStreetBets users. But the action picked up again in late February and got a boost today from actual news out of the company. Shares jumped 20% early Monday and remained up 13% as of 10:15 a.m. EST.

So what

Today, GameStop released a business update letting investors know that it has formed a new "strategic planning and capital allocation committee" to be led by Ryan Cohen. The exponential rise in shares in January began after it was announced that Cohen, activist investor and co-founder of online pet retailer Chewy (CHWY -2.00%), was being added to GameStop's board of directors. 

Arrow rising into sunlit sky.

Image source: Getty Images.

Now what

The new committee is meant to help the company transform its brick-and-mortar business to e-commerce. The company said in the release that it wants to become a "technology business." The committee will evaluate "current operational objectives, capital structure and allocation priorities, digital capabilities, organizational footprint, and personnel," the statement added. 

Retail traders that initially drove up the stock price in a short squeeze believed that there was fundamental reason for GameStop's value to grow. Cohen's success with Chewy gave investors hope that he could replicate it with the video game retailer. Today's announcement brings some support to that belief. The question for current investors is whether the stock that had an approximately $1.3 billion valuation to start the year should actually be valued at its current market cap of almost $11 billion if it transforms its business. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
$95.66 (-3.56%) $-3.53
Chewy, Inc. Stock Quote
Chewy, Inc.
$24.47 (-2.00%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.