(Source -Money)
The meme stock mania is back in full swing as GameStop and AMC Entertainment see a massive rally, driven by a surge in retail investor interest. This resurgence is reminiscent of the 2021 frenzy, which propelled these stocks to unprecedented heights.
Roaring Kitty’s Return Sparks Rally
The recent rally has been fueled by the return of Keith Gill, also known as Roaring Kitty, to social media. Gill, who became famous for his role in the 2021 GameStop surge, posted a series of cryptic video clips on his X account late Monday night. Although he did not mention GameStop directly, his return ignited a buying frenzy among small investors.
GameStop’s stock skyrocketed, climbing over 100% in premarket trading on Tuesday after a 70% gain on Monday. This surge added billions to the company’s market value. AMC Entertainment also experienced significant gains, and even obscure cryptocurrencies named after Roaring Kitty and GameStop saw huge increases.
Retail Traders Bet Big
Retail traders have been heavily investing in GameStop “call” options, essentially betting that the stock’s price will continue to rise. Steve Sosnick, chief strategist at Interactive Brokers, noted that this rally lacks any evident news about GameStop or AMC to justify the surge. “Given my past experience in analyzing the periodic bouts of meme stock activity, consider me suspicious,” Sosnick wrote in a research note.
The rally has inflicted severe losses on short sellers, who bet on stock prices falling. GameStop shorts started the week with $392 million in profits but ended Monday with $852 million in losses, according to Ihor Dusaniwsky, managing director of S3 Partners. “Short sellers may be in for a bumpy and bloody ride,” he added.
Wall Street Analysts Remain Skeptical
Despite the renewed interest from retail investors, Wall Street analysts remain skeptical. Bloomberg reports that only two analysts cover GameStop, both rating it as a “sell” and an “underperform.” The retailer has faced significant challenges, including staff layoffs, executive departures, and declining sales, with annual revenue falling in four of the past five years.
The revival of the meme stock phenomenon underscores the power of retail investors and the influence of social media in modern trading. While the initial frenzy in 2021 led to a congressional hearing, a Netflix series, and a movie, it also resulted in steep losses for those who mistimed the stock’s rapid rise and fall.
As GameStop and AMC stocks soar once again, the market watches closely to see if this is a sustainable trend or another fleeting moment of market exuberance. Investors are reminded of the volatility and risks associated with meme stocks, and the importance of cautious optimism in navigating this unpredictable landscape.
