GameStop, the video game retailer that became famous as an investment in the height of the Covid-19 pandemic, is making another run after reporting earnings earlier this week.
It raises the question of whether meme stocks--names like GameStop, Chewy, and maybe even President-elect Donald Trump's Trump Media & Technology Group--are poised for another turn in the spotlight.
GameStop was the quintessential meme stock at the start of the decade--one whose prices swung wildly, driven not by company fundamentals but by social media posts for retail investors.
It was an anti-establishment movement. Meme stocks were usually ones that institution investors had determined were likely to fall, so they sold them short--in other words, they borrowed shares and sold them, planning on buying them back at a lower price before returning them. By galvanizing an army of non-profession traders to buy shares like GameStop, those short sellers were eventually forced to buy the stock back at higher prices when their borrowing periods ended, a process known as a short squeeze.
GameStop isn't being heavily shorted anymore, its short interest as a percentage of its float currently sits at 8.3%, a fraction of levels seen in the meme frenzy of 2021. But its shares are changing hands.
On Tuesday, GameStop reported earnings that beat analyst estimates, even though sales had dropped 20% from a year earlier. Nevertheless, the stock popped 7.6% on Wednesday and was little changed on Thursday.
Chewy, an online retailer for pet supplies founded by Ryan Cohen, the current chief executive of GameStop, also reported earnings recently. It missed estimates and shares fell after its results, but have staged a comeback this week.
Trump Media, which trades under DJT, often rose and fell along with Trump's chances of winning the election, and its market value is much higher than would be expected for a company with its earnings outlook over the next year. The shares have done very well since Trump won the November vote--they're up 34% in the past month.
Unlike a few years ago, these stock moves don't seem prompted by social media posts. Even though meme-stock celebrity Keith Gill, known online as Roaring Kitty, briefly returned to social media in May, there hasn't been nearly as much widespread momentum this time around.
The recent share-price moves, while significant, aren't nearly as big as the ones seen in the first round of meme-stock frenzy. And it's also unusual that actual earnings reports are catalysts for the stocks, as they have been for GameStop and Chewy recently.
Some meme stocks have disappeared--Bed Bath & Beyond no longer trades. Those that are left are having a bit of a moment, but it's nothing like the glory days of old.
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