Yahoo Finance's Myles Udland and Brian Sozzi break down how the stock market may react to GameStop potentially joining the S&P 500 again.

Video Transcript

MYLES UDLAND: Sozz. Let's talk about a story that caught my attention today in The Wall Street Journal. Akane Otani over there writing about will GameStop be included in the S&P 500? And walking through some of the machinations around how companies get included in the S&P 500, some of the characteristics of GameStop at this point in its corporate life relative to where it has been at past points. It was at one point a member of the S&P 500.

And I think an interesting conversation here that continues to show us how the meme stock phenomenon, sure you've got your support.coms out there where it's like I don't really know what's going on here, stock quintuples and what are we really doing? What's the rumors here? But then you have a GameStop and an AMC, companies that have come out and raised capital, companies that have remade their management with the stock price rallying.

Companies that have created a reality out of sort of an internet fascination perhaps with the business and now could possibly be on the cusp of entering the benchmark index that is constructed by some guys sitting in a room but that does define the overall stock market as at least most investors benchmark themselves.

BRIAN SOZZI: You know, I suspect Myles this take will not surprise you here. It's very simple for GameStop, they don't deserve to be in the S&P 500. Show me several quarters of profits, which is one of the key qualifications to being an S&P 500 component, sure, then you can enter there. But until you do those things, which is I think predicated on the fact on new GameStop management coming out with some form of longer-term plan and articulating that to investors, which they've been reluctant to do. Really so let them earn their way into the S&P 500. It's not a gift. You have to earn your way to be in it.

MYLES UDLAND: Yeah, so there's minimum market cap requirements for S&P 500 inclusion. GameStop's a $16 billion company, so it gets over that. But Akane noting here, you've got to have the sum of your last four quarters earnings be positive and GameStop does not pass this test at that point to your point, Brian says. Tesla did, Tesla got in there. [INAUDIBLE] in the S&P 500.

BRIAN SOZZI: Yeah. Listen, GameStop, they might pass it you know, 15 quarters from now, it's unclear. But until they do, until they show that they are a company that could turn around, that they are more than just a video game seller of packaged goods in a world that is moving digital, they shouldn't be in it. It's that simple. Good for S&P.

MYLES UDLAND: When will Allbirds be in the S&P 500?

BRIAN SOZZI: First day of trading. No. [LAUGHTER] They have to be profitable too. They would have to pass the test. And as we learned once. They have not profitable.

MYLES UDLAND: Rules are the rules and you and I certainly don't make them. So you know, Traeger, where [INAUDIBLE]?

BRIAN SOZZI: They should be in the S&P. They're making money, Myles. Let them be in the S&P. Let Weber go in there, they're making money. Good for them. Not GameStop.