Why GameStop Stock Soared Today | The Motley Fool

What happened

Shares of GameStop (NYSE:GME) 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 (NYSE:CHWY) founder and former CEO Ryan Cohen, who is one of GameStop’s largest shareholders. 

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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