GameStop stock surges 39% on surprise quarterly profit

The shares went up by as much as 39% in extended trading after GameStop Corp. reported a surprise profit in the fourth quarter and beat analysts estimates for revenue.

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The Grapevine, Texas-based video game retailer said in a statement that it had net income of $48.2 million, the first profit in two years, and compared to a loss of $147.5 million a year ago. Earnings per share were 16 cents, compared to a year ago's loss of 49 cents. Net sales fell by 1.2% to $2.23 billion in the three months ended Jan. 28, but that was higher than analysts projections of $2.18 billion.

After hours in New York, the shares went to a high of $24.50. The meme stock has fluctuated wildly over the past two years, and is currently covered by very few analysts.

Matt Furlong, Chief Executive Officer, said GameStop was a much healthier business than it was in the beginning of 2021, and that's why Chief Executive Officer Matt Furlong said on a call with analysts. We have a path to full-year profitability. The company didn't offer an outlook for 2023.

GameStop, known for its consumer electronics and gaming merchandise, has struggled with profitability as the industry has moved away from physical discs to online downloads. The industry has been further hamstrung by supply chain constraints on consoles and a relatively light schedule of new game releases last year. In 2022 US video game sales dropped 5%, according to industry researcher NPD Group.

One of the bright spots in the quarterly results was GameStop's business selling physical collectibles, an area that the company has identified as a long-term priority. Sales in that category rose 12% to $313.2 million. Sales in the hardware and accessories category rose 4.6% to 1.24 billion, but software sales fell 15% to $670.4 million.

Supply chain delays during the pandemic left GameStop with a backlog of inventory that had been accrued during previously high demand during the early Covid era. The company reduced its stock to $682.9 million at the end of the year, down from $915 million a year earlier.

Activist investor Ryan Cohen joined GameStop's board in 2021 and became its chairman in 2021, which included a reorganization that included the ousting of the chief financial officer and company-wide layoffs. A partnership with FTX US last fall, which was announced as a result of a push into digital assets, has so far produced mixed results.

Retail traders turned GameStop into a meme stock during the Pandemic, wildly pumping up its share price based on social media chatter that was unrelated to the company's fundamentals.

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