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Why GameStop Couldn't Hold Onto Its Gains Today

And just like that, GameStop's (NYSE: GME) gains for the day vanished, performing a perfect 180-degree U-turn from where they stood at the middle of the day, Thursday, to close in the red, down 3.7%.

The loss brought to eight the number of consecutive days the video game retailer has fallen. So far in 2022, the stock is down 28%, an ignominious start to the new year.

Image source: Getty Images.

GameStop's got no game

Of course, one of the most recent reasons for its failing fortunes is the announcement by Microsoft (NASDAQ: MSFT) that it would be acquiring Activision Blizzard (NASDAQ: ATVI) for almost $70 billion, or $95 per share in cash. The fear is that by absorbing the video game developer into its ecosystem, Microsoft would make most or all of Activision's games exclusive to its own Game Pass platform, and this could starve GameStop for customers in the future.

The pre-owned video game market has long been one of GameStop's crutches even as the industry continues to transition to digital gaming and game downloads. Some (perhaps many) people still want or prefer physical media to play, but pulling in one of the biggest game developers could deny GameStop access.

Also, in making the acquisition, Microsoft will become the world's third largest video game company behind Sony and Tencent.

The harder they fall

Yet GameStop's stock trading, at least today, seems more in sync with what's happening in the broader market than with any particular issue specific to video games. The Dow Jones Industrial Average has also been on a week-long losing streak and looked like it was going to rebound today, having risen over 300 points by midday.

Yet it also steadily lost ground until it ultimately was down 313 points at the close. Being one of the original meme stocks means GameStop is going to be a volatile issue, and because it rarely trades on the fundamentals of its business, the video game retailer will suffer such misfortunes more regularly, just as it did today.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns and recommends Activision Blizzard, Microsoft, and Tencent Holdings. The Motley Fool has a disclosure policy.


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