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GameStop stock explodes on first profitable quarter in 2 years

Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss the surge in stock for GameStop and how it’s affecting meme stocks.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: We're coming up on the opening bell in just a bit. Let's talk about some movers. Here's a very moving mover today. That's GameStop. It's surging this morning, after the video retailer exceeded earnings estimates and reported its first profitable quarter in two years. And this was a surprise, the company's net income $48.2 million.

It had a loss just about triple that a year earlier, net sales $2.23 to billion, which also beat estimates here, even though they were lower year over year. As our afternoon team talked about, I think with Ihor Dusaniwsky yesterday, this is a stock that has very high short interest. And so when you get a bit of positive news, you get a short squeeze, which appears to be at least part of the picture today.

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BRAD SMITH: Yeah, one thing that I did want to call out here and kind of just a nod of confidence on how they are kind of reattaching themselves, perhaps, to some of the fundamentals. Inventory improvement was significant, $682.9 million at the close of the period. You compare that to what they had at the close of the prior year's fourth quarter of $915 million there, so trying to churn through some of that inventory. They have such a focus on really getting this back to a healthy position. And so continuing to see that improve, that's one huge thing.

Another thing is what they've seen in terms of the digital side of the business and continuing to invest further into that. We know this was a big task item and prioritization, even as Ryan Cohen annexed himself and his inclinations to move this towards a more digital savvy or even digital first to the extent that they can with the brick and mortar footprint that they have type of brand. And I think some of those efforts are really starting to pay off now too.

JULIE HYMAN: They are. And yet, this company, which has been sort of notorious for giving short conference calls, for not giving a lot of guidance-- it still isn't giving guidance. The company's CFO said on the call that it's a much healthier business than it was, that they started 2021, and that they have a path to full year profitability. But they didn't give a specific outlook for the full year, so just something to note there when we're talking about GameStop.

But as is frequently the case, when you get one meme stock doing well, you get a lot of meme stocks doing well. And that seems to be the case again today. You see there some of the other stocks moving higher in premarket trading, Bed Bath and Beyond and AMC sort of the more classic memes. There's actual news on Virgin Orbit, which we'll get to in a second. But we are seeing this ripple effect on the memes.

BRAD SMITH: Yeah, a little bit of a move in sympathy, at least as some of the gamers are celebrating here on the day, or the shoppers in GameStop, or just the people who have been holding on for dear life for quite some time and the longer ebbs and flows of the stock price gyrations. But at the end of the day too, going forward, I think looking at and keeping tabs on Bed Bath and Beyond, keeping tabs on AMC, those are still companies that are trying to reattach themselves to fundamentals as well.

AMC just came off of a year where there was a massive title and content blitz just to try and get people back into the theaters. And so if it wasn't last year, then what does this year hold for them, knowing that some of those dollars might tighten even more, given the expense that a movie theater experience is? And then separately in Bed Bath and Beyond, you know the turmoil that's taking place there.

JULIE HYMAN: Yeah. I've got the heat map up on the YFi interactive of all of the memes here. And GameStop, as we mentioned, the stock is up some 54% in premarket, Carvana also higher on a new debt offering, which we're going to-- or I guess it's paying down some of its debt. We're going to talk about that a little bit later, all of these on the upper left of your screen, AMC, Bed Bath and Beyond up this morning at about 8% here with little change in yesterday's trading. So that's sort of the bigger picture on the memes.