Meme stocks are rising before the opening bell Wednesday after GameStop, one of the most heavily traded off-brand stocks during the pandemic, posted a surprise profit for the fourth quarter.
Rather than a per-share loss of 16 cents as Wall Street had expected, the video game retailer reported a profit of 16 cents per share, or $48.2 million in all.
GameStop's revenue fell and much of the profit gain came from aggressive cost cutting, including store closures and layoffs. However, as was the case during the pandemic, fundamentals that typically drive stock movement appear to be being pushed aside.
Shares of GameStop Corp., Grapevine, Texas, surged 52% in premarket trading and it pulled other meme stocks along for the ride.
During the pandemic, GameStop was a member of a group of beat-down stocks that drew smaller investors in huge numbers. The theory was that if enough small investors got in the game and drove the stock higher, it would force large hedge funds with short positions (bets that the stock would fall), to capitulate and sell those positions at a massive loss.
