Daily Management Review

Meme Stocks, Whether You Like Them Or Not, Are Back


Meme Stocks, Whether You Like Them Or Not, Are Back
Meme stocks are surging once more, thrilling supporters, annoying critics, and demonstrating to Wall Street that the social media powerhouse responsible for the incredible 2021 GameStop rise is still going strong.
Reigning supreme once more, the US video game store has surged 340% in the last ten trading days following a series of posts on the X platform from an account connected to Keith Gill, the driving force behind the last craze.
The stock of other businesses has also done so, including food storage container manufacturer Tupperware and movie theatre operator AMC. Koss makes headphones. Similar to GameStop, a large number of the stocks have seen a decline in their fundamentals over the past few years and are heavily shorted.
"It's hard not to use words like 'insane' when you look at this as a trader," said Jay Woods, chief global strategist at Freedom Capital Markets. "The first time this happened, it was more of a movement, but right now this looks like a craze where people are saying, 'Here's an opportunity' and 'Let's see if we can make a quick buck off of it.'"
This is a brief, chart-based analysis of some of the elements influencing the meme stock phenomenon's comeback.
GameStop and other meme stocks still have a ways to go before they equal the advancements in 2021, despite their recent astounding gains. That year, GameStop's stock increased by as much as 1,700%, AMC's by 2,850%, and Blackberry's U.S. listed shares by around 280%.
Many of these businesses have been the focus of short sellers, who are investors who hope to make money by selling borrowed shares and wagering that the price of the stock will drop.
This year, short interest in GameStop increased gradually until mid-April, when it reached a 20-month high of 25%, just a few weeks before the company's shares began to rise.
According to exchange statistics, it is much less than the greatest level of short interest that occurred in October 2020, when almost 107% of GameStop's free share float was sold short.
The rallies have delivered a severe blow to short sellers. Estimates from ORTEX indicated that year-to-date paper losses at GameStop alone were $1.28 billion.
However, according to Peter Hillerberg, co-founder of ORTEX technologies, there was no sign that a short squeeze—which happens when a rising stock price compels negative investors to unwind bets and purchase back shares—was taking place.
Along with the recent big stock boom, options trading has soared as well. A large portion of the activity is focused on optimistic call options, which benefit when stock prices climb.
GameStop's options volume reached 818,843 contracts on Tuesday, the biggest level since March 2021. Trade Alert data shows that AMC saw 1.9 million contracts exchange hands, the biggest in about nine months.
Retail activity has increased dramatically over the past month, according to trading data, but Marco Iachini, senior vice president at Vanda Research, noted in a statement that it is "still a far shout relative to peak meme mania days."
"We think retail's hand has been significant in pushing GME, AMC and other meme stocks higher Monday, and so far on Tuesday."