GameStop (NYSE:GME) stock is up nearly 25% on news that the beloved video game retailer is launching a marketplace for non-fungible tokens (NFTs). What else do investors need to know?
GameStop, which was the original meme stock and has been at the center of a retail trading frenzy over the past year, is now expanding into one of the most-hyped and controversial tech sectors.
NFTs, linked to cryptocurrencies, allow proof of ownership of digital goods to be stored on the blockchain. Ethereum (CCC:ETH-USD) currently underpins the majority of the market. Interest in NFTs — and their prices — continue to skyrocket in recent weeks. In fact, one popular collection just surpassed $1 billion in total sales.
Investors clearly like that GameStop is moving into NFTs, and the news has provided a shot in the arm to GME stock, which is up 624% from a year ago at $131.03 a share. Investors are also hoping that GameStop will continue its turnaround story — shares are down more than 70% from their all-time high of $483.
With a big bet on NFTs underway, here are five things you should know about GameStop now.
5 Things to Know About the New GME Stock Catalyst
- GameStop says its NFT marketplace will focus on virtual video game products. These will include outfits and accessories for avatars, which users can deploy in various games.
- The company has already hired 20 people to work on the NFT marketplace. They are starting by building an online hub for buying, selling and trading NFTs.
- As part of its marketplace plans, GameStop is also working to develop partnerships with crypto companies. It hopes these firms will help it develop the underlying blockchain technology.
- The NFT marketplace is part of GameStop’s bigger strategy to become more of an e-commerce company and move away from its traditional role as a brick-and-mortar retailer. Chairman Ryan Cohen has said that he wants GameStop to become the “Amazon of gaming.”
- NFT marketplaces can be lucrative businesses. OpenSea was recently valued at $13.3 billion by investors.
What Comes Next for GameStop
The retail traders who have continued to support GameStop through its many ups and downs over the last year appear to be once again driving the price of GME stock higher.
The company’s move into NFTs and cryptocurrencies seems to be resonating with those investors. While today’s move higher is good news for GameStop shareholders, the stock remains extremely volatile and is likely to continue running hot and cold in the days and weeks ahead. Also, while the move into NFTs and cryptocurrencies is promising, the company has not yet executed on the strategy. Time will tell if it is ultimately successful or not.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.