Why GameStop Stock is increasing today

What happened

Actions of GameStop (NYSE: GME) rose 2.4% in morning trading on Thursday as the sale that followed fears of a default from China’s largest property owner dissipated. The major stock market indices have regained all the ground lost since the China Evergrande the crisis broke out.

So what

While you wouldn’t think that a default by a Chinese company would trigger a global rout, as it did on Monday, it signaled how the Chinese economy is weakening and the potential losses of Evergrande could cause. a cascading effect that would spread around the world. . China has sought to stabilize its financial system by injecting $ 17 billion into it.

Friends playing video games

Image source: Getty Images.

This only affects GameStop tangentially, but a default by the real estate developer could trigger a recession that would hamper the video game retailer’s ability to recover its own financial bases. GameStop is transforming its business into one focused on digital and online assets, and it needs the U.S. economy to continue on its current course if it is to be successful.

Now what

While this may be one of the original meme stocks born out of the stock market frenzy that erupted in January and February, GameStop is more of a trade today as to whether it can manage to reimagine its to come up.

As exciting as it is, the proposition remains a proposition that has yet to be proven. GameStop is still in the first inning, and the potential for a takedown is high. That’s why it doesn’t need any disruption, and if the market feels that China will keep Evergrande afloat by injecting the necessary capital, it bodes well for global stock exchanges and for stocks, especially the video game retailer. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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