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👀 Bezos, Buffett & Berkowitz: What's in Their Portfolios? Unlock Data
GameStop leads meme stock rally after posting surprise 4Q profit
Published Mar 22, 2023 13:00
© Reuters
By Michael Elkins
Shares of GameStop (NYSE:GME) are up 37.28% in mid-day trading on Wednesday after the video game retailer posted its first profitable quarter since January 2021. The company reported a net income of $48.2 million, compared to a net loss of $147.5 million for the prior year's fourth quarter.
Shares for other meme stocks popularized during the pandemic, including AMC Entertainment (NYSE:AMC) and Bed Bath & Beyond (NASDAQ:BBBY), also increased as a result.
GameStop CEO Matt Furlong told investors during a post-earnings call Tuesday that the company’s profit was impacted mainly by a decision to cut costs, noting that it is "aggressively focused" on future profit while "pursuing pragmatic long-term growth."
GameStop recorded a 16% decline in costs during the quarter and surprised Wall Street analysts with a profit. Investors saw this as an early sign of turnaround for the company.
The stock hit its highest level in more than four months with 12.7 million shares changing hands in the first 15 minutes of trading, among the top five most traded U.S. stocks.
"Luckily, this go around is not due to meme investors, but an actual tangible fundamental event," said David Wagner, portfolio manager at Aptus Capital Advisors.
GameStop’s stock and sale numbers had fallen for years before a pandemic-driven meme-trading craze between 2020 and 2021. The company suffered as video games become more available for digital download, making it unnecessary for consumers to visit physical stores. Users of the Reddit forum "WallStreetBets" bought GameStop stock en masse to a short-squeeze play, causing hedge funds to lose billions, with Melvin Capital going out of business a year later because of its heavy losses from the effort. Other stocks were then popularized on social media as a result, including AMC and Bed Bath & Beyond.
AMC Entertainment gained 5.3%, while Bed Bath & Beyond rose 7.5%. Both shares, along with GameStop, were at the heart of the meme stocks frenzy in 2021.
Analytics firm Ortex estimates that short sellers betting against GameStop have lost $610 million since the start of the week, adding that about 24% of GameStop's publicly available shares were in short position.
Shares of GME and AMC are up 34.39% and 3.08% respectively in mid-day trading on Wednesday while BBBY has fallen back into the red, down 1.25%.
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