Meme stocks return: Yahoo Finance Reports

GameStop's stock recently experienced a dramatic surge, reminiscent of the 2021 meme stock phenomenon. On May 13, 2024, GameStop (GME) shares skyrocketed more than 70% in just one day, reviving memories of the retail investor frenzy that captivated the financial world three years ago. This unexpected spike was triggered by a viral social media post from "Roaring Kitty," a key player in the initial meme stock craze. The stock plummeted more than 20% just a few days later when the video game retailer announced plans to issue more shares and released disappointing preliminary first quarter results.

YouTube Host Matt Kohrs observed the similarities to past GameStop stock action noting, "it's very similar to 2021, this is the resurgence of meme mania."

Financial Insyghts President Peter Atwater warned it may indicate a potential market downturn. "The meme stock trade tends to only occur at extremes of sentiment... this is another moot indicator that the markets are reaching a point where we should expect some sort of a meaningful pullback."

tastylive Founder and CEO Tom Sosnoff explains that does not see the relation to the 2021 GameStop event, "I don't look at this at all like I did it 2021...this is all the players just transitioning or moving into something that's actually active."

Wedbush Equity Research Managing Director Michael Pachter warned investors of Gamestop's future. "They're going to see continued declines, there is nothing big coming out this year...lots of headwinds for them and I don't see any way out of it."

For more expert insight and the latest market action, click here.

This post was written by Colin Webb.

Video Transcript

Shares of meme stock as we were talking about Gamestop ticker GME soaring over the last two days, up 200% here to remind viewers, a meme stock is a company that has gained viral popularity online.

The excitement of frenzy around the company usually occurs on social media platforms and then the results.

Yeah, big price swings.

So the recent price action was spurred by this, just this just a man sitting there then leaning forward, but it's because of who it was tweeted out by the return of Trader and youtuber were Kitty on X formerly Twitter after nearly three years of a posting hiatus.

Roaring kitty.

Uh A K A Keith Gill is known for helping ignite the meme stock frenzy of gamestop back in 2021.

What should people be watching out for as they're looking at stock charts like GME, like a MC and particularly where some of the frenzy has pushed the price action higher by 200% in the past couple of days here.

For GME, particularly a phenomenal question.

I think one of the main things to hear about this play, what's going on is it's very similar to 2021.

This is the resurgence of meme mania if you will, which means all the discussion about fundamentals, is it fundamentally fair, overvalued, undervalued?

I would actually contend just throw that out the window.

The meme stock trades tend to only occur at extremes and sentiment.

And so to me, this is yet another um mood indicator that the markets are reaching a point where we should expect some sort of a meaningful pullback.

Because, you know, if we look at the relationship between, you know, stocks like gamestop and, and the broader markets, th this coincidental euphoria seems to be repeating over and over a stock rally already showing signs of fizzling out here.

Shares of both gamestop and A MC under pressure after two days of big game, I don't look at this at all like I did in 2021 when it was almost a transformational moment, dragging, you know, tens of millions of people back into the marketplace.

That's not what we're seeing today.

This is just, you know, this is all the players just um kind of transitioning or, or moving into something that's actually active.

This is kind of like the old days on the trading floor when there was a lot of noise in one in one pit, everybody would run that pit.

That's what we're seeing today.

They're going to see continued declines.

Uh There's nothing big coming out this year, you know, we don't have anything incremental.

This year.

Next year you have Grand Theft Auto but nothing big.

No new consoles.

This year, lots of, uh, of head winds for them and I don't see any way out of it.

The preliminary results were actually worse than we had modeled.

They did under 900 million in revenue and we had modeled a million that's down 25% year over year.

They're done shrinking their cost structure.

The only question is, can they, you know, shrink their store count and re return to profitability?

I don't think so.

They lost money last year.