Meme stock GameStop surges nearly 50% after it posted a surprise profit for the first time in two years

• GameStop reported a surprise profit in the fourth quarter of 2022, boosting its share price.
• GameStop's share price surged nearly 50% in after-hours trade on Tuesday.
• GameStop skyrocketed in popularity in 2021 as investors used the WallStreetBets subreddit to pump so-called meme stocks.

Shares of video game retailer GameStop, a meme stock popularized on Reddit's WallStreetBets forum, surged nearly 50% in after-hours trade on Tuesday after the company reported its first quarterly profit in two years.

GameStop reported a profit of $48.2 million in the fourth quarter of 2022 — reversing a $147.5 million loss in the same period a year ago — despite a 1.2% decrease in revenue to $2.23 billion.

"GameStop is a much healthier business today than it was in the start of 2021," said Matt Furlong, GameStop's CEO, at the company's earnings call on Tuesday.

GameStop steered its way back into profitability by cutting costs and optimizing inventory in 2022, Furlong said. This included reducing the company's headcount and streamlining its operations.

The company is expected to continue to cut excess costs in 2023, including winding down operations in certain countries in Europe, per Furlong. It also aims to boost its higher-margin businesses such as collectibles and toys.

Furlong even said GameStop has "a path to full-year profitability."

GameStop skyrocketed in popularity in 2021 as retail investors used the WallStreetBets subreddit to identify and pump the so-called meme stocks. Forum chatter produced huge swings in the share prices of companies like GameStop and movie theater chain AMC, with GameStop surging nearly 1,000% during a two-week period in January 2021. GameStop share prices have come off since then but remain volatile. 

GameStop shares closed 4.6% higher at $17.65 apiece on Tuesday. They extended gains by another 48.4% to $26.20 apiece in after-hours trade.

GameStop's stock is down 4.4% so far this year.