Just a few weeks ago it seemed as though GameStop (NYSE:GME) was doing everything wrong amid the novel coronavirus. That all could be changing thanks to one determined investor. In fact, GameStop stock is soaring in the market today on news of his turnaround plan.
But what exactly is this plan? And why are investors so bullish on GameStop stock here?
To understand the upside catalyst, you first must understand a bit of the history. Many investors had already planned a funeral for GameStop. Once a beloved brick-and-mortar retailer of video games and gaming accessories, the company has fallen on hard times. Unfortunately, it is straight out of the era of Blockbuster and department stores, and you know how those stories ended.
GameStop stock also seems to clash with what is driving the market right now. Amazon (NASDAQ:AMZN) rewrote the rules and now e-commerce is winning, especially amid the pandemic.
According to Chewy (NYSE:CHWY) founder Ryan Cohen, there is a real chance for GameStop to rival Amazon in the long term. His logic? Just because Blockbuster Video failed to embrace a futuristic opportunity with Netflix (NASDAQ:NFLX) does not mean GameStop is destined for the same ending.
Details of the turnaround plan are not yet known, but many investors are guessing that e-commerce expert Cohen is going to help GameStop expand its online business. Others are thinking he will pivot to a direct-to-consumer shipping model. Either way, Wall Street likes the news. GameStop stock was higher by almost 20% in pre-market trading.
GameStop Stock Soars on Turnaround Plan
There are two important things for investors to note here. The first is that Cohen is a tried-and-true entrepreneur in the e-commerce world. He built Chewy into a household name, and has gone onto to the world of venture capital. Clearly his backing of GameStop has Wall Street excited, and it could give the company some leverage if it does decide to rival Amazon.
Importantly, this is a big year for video games. New consoles from Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) will hit shelves just in time for the holiday season, which was already considered by some as a gift to GameStop. Add in the broad consumer awareness over video gaming thanks to the pandemic, and the announcement from Cohen appears perfectly timed.
It may be a long shot, but at least there are a number of catalysts working in its favor. This rally in GameStop stock could be just the first of what is to come.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.