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Here's Why GameStop Stock Tanked Today

By Howard Smith – Updated Sep 9, 2021 at 4:54PM

Key Points

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The second-quarter report left investors with more questions than answers.

What happened

GameStop (GME -5.20%) reported its second-quarter 2021 financial results last night. Investors still closely watch the original meme stock to see if the anticipated turnaround spurred by the hiring of online retailing executive Ryan Cohen as chairman can justify the stock's high valuation. The reaction pretty much tells the story this morning: As of 10 a.m. EDT on Thursday, shares were down more than 9%.

So what

It wasn't so much what management said that disappointed investors as what it didn't say. The first quarterly conference call under new CEO Matt Furlong lasted less than 10 minutes, and the company didn't take questions from analysts. Retail traders who pushed shares to new heights and created the meme stock genre might now be losing faith. 

red arrow crashing into ground representing stock dropping.

Image source: Getty Images.

Now what

Even with today's drop, GameStop still has a $15 billion market cap. Retail investors hope to justify that with an explosion of growth in the company's online business. In addition to Cohen's online experience, Furlong, who started in June, has e-commerce experience from his previous role with Amazon (AMZN -2.15%)

While the company grew sales by more than 25% compared to the prior-year quarter, GameStop reported another net loss. Perhaps more importantly, it didn't give investors any real information on its strategy. 

The failure of the company to take questions on the conference call prompted one analyst to tell investors to "sell the stock first, ask questions later." Many seem to be following that advice this morning.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Howard Smith owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

GameStop Stock Quote
$26.09 (-5.20%) $-1.43 Stock Quote
$92.11 (-2.15%) $-2.02

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