Meme Stock Frenzy Reignited?
On Monday, GameStop stock experienced its biggest surge in years, climbing over 70% to reach over $30 per share by midday Eastern time. This dramatic rise is likely linked to the return of a prominent day trader, Keith Gill, better known online as "Roaring Kitty."
The Roaring Kitty Effect
Gill played a pivotal role in the initial GameStop frenzy of late January 2021. His social media posts, particularly on the former Twitter (now X) and Reddit's WallStreetBets channel under the username "DeepF*ckingValue," fueled a massive short squeeze that propelled the stock to a staggering high of $483 before a steep decline.
A Three-Year Hiatus Ends
After a three-year hiatus, Gill sparked Monday's rally with posts on X and Reddit. The first post was a popular meme depicting a suited figure leaning forward and holding a gaming controller, symbolizing focus and readiness. This single post garnered over 15 million views on X by Monday morning.
Trading Frenzy and Meme Stock Resurgence
The surge triggered multiple trading halts on Monday as volatility circuit breakers were activated. Gill continued posting throughout the morning, further amplifying the frenzy. Notably, one post featured the Avengers villain Thanos alongside Wolverine, seemingly suggesting a "do-it-myself" approach.
Monday's surge wasn't limited to GameStop. AMC Entertainment, another meme stock that soared in 2020-2021, witnessed a 40% rise to over $4 per share.
Looking Ahead: A Word of Caution
Despite the recent gains, GameStop actually reported decent results for the fourth quarter of fiscal 2023. While net sales dipped by 19%, net income saw a 31% increase. The company is scheduled to release its first-quarter earnings report for fiscal 2024 on June 5th.
This episode serves as a cautionary tale for investors. While meme stocks might experience resurgences fueled by social media, it's crucial to base investment decisions on factors beyond hype and short squeezes.