GameStop Explodes 44% On Major Microsoft Tie-Up, As Trading Resumed

Shares in GameStop (GME) exploded by 44% in Thursday’s trading, and continued to move 4.5% higher in after-hours trading, after the video game retailer announced a new tie-up with Microsoft.

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Trading resumed on Thursday after an exchange halt following news of the deal.

According to GameStop, the multi-year strategic partnership agreement with Microsoft (MSFT) will allow it to expand its physical and digital video game offerings, as well as enhance its retail technology infrastructure.

Under the agreement, GameStop will standardize its back-end and in-store solutions on Dynamics 365, Microsoft’s portfolio of cloud-based business applications and customer data platform.

Store associates will also be equipped with new Microsoft Surface devices that GME says will allow associates to move freely within the store, meeting the needs of customers faster and more efficiently. At the same time, GameStop will roll out Microsoft 365 and Microsoft Teams to its stores to boost productivity and collaboration.

And GameStop has expanded its Xbox family of product offerings to include Xbox All Access, which provides an Xbox console and 24 months of Xbox Game Pass Ultimate to players with no upfront cost.

Jim Bell, GameStop’s CFO commented, “We believe Microsoft’s integrated retail technology platform will enable the continued development of our frictionless omni-channel digital environment, providing customers with an exceptional cross-channel experience for all things video gaming.” (See GME stock analysis on TipRanks)

With Thursday’s rally, GME shares have now surged over 120% year-to-date. And as a result the Street has a cautious Hold consensus, with 2 buy ratings offset by 4 hold ratings and 2 sell ratings. Meanwhile the average analyst price target of $6.29 indicates 53% downside potential from current levels.

Jefferies analyst Stephanie Wissink reiterated her buy rating on GME following the ‘net-positive’ announcement, arguing that it “at least partially remov[es] a headline risk that GameStop loses all value from software sales as they shift from physical to digital.”