Want a blast from the past? Look at the major price movements in GameStop (NYSE:GME) shares today. Following a group of optimism-inducing headlines, GME stock is soaring higher.
With GameStop shares up nearly 70% in intraday trading, here is what you need to know now:
- GameStop has been struggling in recent memory thanks to the rise of e-commerce outlets.
- In fact, GME stock hit a 52-week low of $2.57 in April 2020.
- Many bearish investors believe that GameStop will face a similar fate as department stores and Blockbuster Video.
- However, that story began to change in September 2020.
- At the time, Chewy (NYSE:CHWY) founder Ryan Cohen expressed an interest in helping GameStop become an Amazon (NASDAQ:AMZN) rival.
- This came after Cohen acquired a 10% stake in GME stock, making him the largest individual investor.
- Through his firm RC Ventures, Cohen said he was willing to become more involved with GameStop if it would help shareholders.
- Importantly, GME stock shot up on the news.
- This is because Cohen has a promising track record in the e-commerce world. Since building up Chewy, he has also found success in the venture capital world.
- In September, it was not clear exactly what Cohen was planning to do.
- Possible theories included GameStop expanding its online shopping business and moving to direct-to-consumer shipping.
- Now, it is more clear what Cohen and RC Ventures are working on.
- On Monday, GameStop announced it will place Cohen, Jim Grube and Alan Attal on its board of directors.
- As Rhian Hunt wrote for The Motley Fool, GME stock was soaring today in a short squeeze.
- A short squeeze refers to situation wherein a stock rallies, forcing anyone betting that its price would fall to buy shares. This helps prevent worse losses, and also furthers the rally.
The Bottom Line on GME Stock
So what should you do with GME stock here?
Well, the advice we gave in September holds up. GameStop faces an uphill battle, but the support of Cohen and his Chewy peers should help the company. If it can lean into e-commerce and the popularity of video games, particularly amid the novel coronavirus, things could start to turn around.
However, be incredibly cautious here. Wait to see what sort of direction GameStop takes with its new directors. For reference, analysts have an average 12-month price target of $10.72 on GME stock. Although today could make that target irrelevant, it would be helpful to know more details of the potential GameStop turnaround story.
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 with InvestorPlace.com.