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Why GameStop Stock Soared Today

By Joe Tenebruso - Mar 9, 2021 at 9:41PM

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The video game retailer wants to become a tech company.

What happened

Shares of GameStop (GME 8.43%) surged 27% on Tuesday, furthering the stock's sharp rise this week.

So what

GameStop said on Monday that its board of directors created a "Strategic Planning and Capital Allocation Committee" to accelerate its digital transformation. The committee is being led by Chewy (CHWY 2.80%) founder and former CEO Ryan Cohen, who is one of GameStop's largest shareholders. 

An upwardly sloping stock chart.

GameStop's stock price is skyrocketing again. Image source: Getty Images.

The committee is working to strengthen GameStop's digital capabilities. E-commerce has become a vital segment of the company's business, as sales of traditional game discs have largely given way to digital downloads in recent years.

GameStop has hired several executives to spearhead its technology-focused initiatives. It's also looking for a new chief financial officer following CFO Jim Bell's resignation in February.  

Now what

GameStop has long searched for ways to adapt its operations to changing consumer preferences. Digital game downloads represent an existential threat for its brick-and-mortar retail stores and high-margin used game business, and GameStop has struggled to overcome sales declines in these areas.

Cohen joined GameStop's board in January, with the goal of helping to improve the game retailer's online abilities. "We are excited to bring our customer-obsessed mindset and technology experience to GameStop and its strategic assets," Cohen said in a press release announcing his board appointment.  

Cohen's appointment helped to ignite a short squeeze in GameStop that drove its stock price up more than 15-fold before it fizzled out and its shares reversed course. His success in transforming the retailer into a legitimate e-commerce player will go a long way toward determining whether this latest rally in GameStop's shares proves sustainable.

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
$99.19 (8.43%) $7.71
Chewy, Inc. Stock Quote
Chewy, Inc.
$24.97 (2.80%) $0.68

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

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