The Return of Meme Stocks: GameStop and AMC Surge Again
The stock market is once again abuzz with meme stock frenzy, as GameStop and AMC Entertainment take center stage following the online return of one of the key figures of the 2020 and 2021 craze. Keith Gill, also known as “Roaring Kitty,” made a comeback online, sparking a surge in meme stocks once again.
How It All Started In 2020
The meme stock craze began in 2020 when retail investors, led by Gill and others, believed that stocks like GameStop and AMC were undervalued due to perceived weaknesses in their business models. Large hedge funds had taken short positions on these companies, betting on their eventual failure. Gill outlined a strategy in a YouTube video that could drive GameStop shares from $5 to $50 or above, rallying online traders to buy and hold shares, causing prices to soar.
OG Meme Stocks Still Below 2021 Highs
Despite the recent surge, GameStop and AMC are still below their 2021 highs. GameStop’s stock price has risen by 179% over the past two sessions but remains below its record of over $85 in January 2021. AMC’s stock closed at $6.85, up 135% since Friday but far from its all-time highs above $300 set in June 2021.
In its first-quarter earnings report, AMC reported a net loss of $163.5 million as it works to recover from pandemic-related challenges. GameStop managed to post a profit of $6.7 million for fiscal 2023 after closing many stores in fiscal 2022.
What’s Different This Time
While GameStop and AMC saw increased activity this week, it pales in comparison to the cash inflows seen in early 2021. Retail investors likely played a significant role in driving the surge, but analysts doubt that the current meme stock craze will reach the heights of 2021. Hedge funds are better prepared for short squeezes today.
What the Latest Craze Says About Investor Behavior
Despite concerns about inflation and high-interest rates, retail investors continue to flock to speculative investments like meme stocks and cryptocurrencies. The recent surge in meme stocks mirrors the rise in cryptocurrency prices, indicating a willingness to take risks in the current market environment.
What To Expect From Here
Analysts predict that hedge funds may participate in a short squeeze of meme stocks before retail traders sell off their shares, leading to a shorter and less dramatic surge compared to 2021. GameStop is considered a “very squeezable short,” with the potential for short sellers to be squeezed out of their positions before a new wave of shorting follows.
In conclusion, the resurgence of meme stocks like GameStop and AMC highlights the ongoing volatility and speculative nature of the stock market. Retail investors should proceed with caution and consider the risks involved in trading meme stocks. Stay tuned for further developments as the saga of meme stocks continues to unfold.
