Why GameStop Stock Rebounded Today - Motley Fool

What happened

Shares of GameStop (NYSE:GME) rallied on Friday following a steep fall in the video game retailer's stock price from its recent highs over the past week. By the close of trading, GameStop's stock price was up 19.2% after rising as much as 77.6% earlier in the day.

So what

After an epic short squeeze fueled a surge in GameStop's share price to a high of $483 on Jan. 28 -- up from $18.84 on Dec. 31 -- the stock began to sell off. Trading restrictions imposed by Robinhood and other brokerages that limited how many GameStop shares investors could buy no doubt contributed to the decline.

A person is pointing to a digital stock chart that rises, then falls, and then rises again.

GameStop's stock recovered some of its recent losses on Friday. Image source: Getty Images.

After suffering a backlash from its customers and facing heavy criticism from prominent lawmakers -- some of whom demanded an investigation into its decision to limit trading in GameStop and other stocks -- Robinhood lifted its trading limits on GameStop on Friday. With their ability to buy the stock restored, many GameStop bulls took the opportunity to acquire more shares.

Now what

Although GameStop's stock price rebounded today, the struggling video game retailer remains a high-risk investment. Digital game downloads represent a serious threat to GameStop's network of retail stores and will likely put pressure on its sales and profits in the coming years.

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