GameStop (GME) Stock News and Forecast: GME surges 55% in premarket after turning profit

• GameStop reported $48 million in net income last quarter.
• GME stock soared more than 55% on the news.
• AMC stock has also advanced 9% due to the excitement for meme stocks.
• GME CEO says he sees a path to full-year profitability.

GameStop (GME) stock has advanced more than 55.8%% to $27.50 in Wednesday's premarket with traders euphoric over the video game retailer's first profitable quarter in two years. The excitement has even spread to AMC entertainment (AMC), which has seen its shares jump more than 9% in the premarket as well. The meme stock frenzy has ignited even despite both NASDAQ and S&P 500 futures trading slightly lower ahead of the Fed's interest rate announcement later in the afternoon. The Federal Reserve is widely expected to raise the fed funds rate by 25 basis points to 5% at Chair Jerome Powell's press conference at 2 PM EST. 

GameStop stock news: Earnings finally see green

GameStop reported net income of $48.2 million in the fourth fiscal quarter ending in late January, much better than the $148 million lost one year ago. On an adjusted basis, this came to $0.16 a share, which the complete opposite of Wall Street consensus at $-0.13.

“GameStop is a much healthier business today than it was at the start of 2021. We have a path to full-year profitability,” crowed CEO Matt Furlong during the earnings call.

Revenue of $2.23 billion fell YoY by just under 1% but beat Wall Street consensus by $50 million. The main reason for the earnings beat was management's focus on cutting costs. , or 20.4% of sales, compared to Selling, general & administrative expenses dropped from $538.9 million one year ago to $453.4 million in this quarter. This pushed SGA costs from 24% of revenue to 20% of revenue.

GameStop has been hurt by the trend of video games moving from physical discs to online downloads through gaming consoles. That part of the business saw sales fall another 15% YoY, but the physical collectibles segment helped improve the income statement by growing 12% YoY to $313 million.

GameStop stock forecast

The explosion in the GameStop stock price has traders looking at the resistance range from $26.80 to $28.70. Shareholders in GME have not come into contact with this area since early December of last year. This region held a lot of strength and saw plenty of volume between September and December of 2022. A break above there would mean that bulls had their eye on either the October 31, 2022 high at $35 or the $45 to $50 range that has put an end to the last two major rallies that took place in March and August of 2022. For now, support looks minimal. There could be some, however, between $24 and $25.

GME daily chart