The meme stock phenomenon appears to be making a comeback, with shares of GameStop (NYSE:) and AMC Entertainment (NYSE:) seeing significant gains recently.
This renewed interest comes as retail investor enthusiasm resurfaces, reminiscent of the frenzied trading activity that once lifted these stocks to unprecedented heights. The question now is, have meme stocks made a comeback?
What are meme stocks?
Meme stocks are stocks of companies that gain popularity and see wild price fluctuations primarily due to hype on social media and online forums rather than due to the company’s underlying financials or fundamentals. These stocks are often the subject of viral memes and widespread discussion on platforms like Reddit, especially in communities like r/WallStreetBets.
Why are meme stocks rising again?
After a long hiatus, Keith Gill, known on social media as “Growling Kitty”, returned on Sunday evening, posting for the first time in almost three years on X (formerly Twitter). This post reignited the enthusiasm of individual investors. The resurgence coincides with continued gains in GameStop stock prices, as well as jumps in other meme AMC Entertainment stocks.
Speaking to Investing.com, Joe Vezzani, CEO of LunarCrush, a social analytics company that provides insight into how social sentiment can influence stock prices, said retail traders are “rejoicing that Roaring Kitty is back.”
“The return of Roaring Kitty not only lifted GameStop shares, but also underscored the power of individual investors in today’s market, especially when brought together by a charismatic leader,” Vezzani says.
“His first posts on Reddit many years ago under the name DeepF—–Value and subsequent actions were the catalyst for a historic trading frenzy that shook the foundations of Wall Street, challenged hedge funds and prompted a reassessment of trading rules.” Vezzani believes this could be the catalyst markets are looking for to cut through the noise of inflation and interest rates, giving the average investor something to rally behind.
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“In a world where stories are traded, the return of Roaring Kitty is a bullish move for small-caps and crypto,” he adds.
What’s different about the rise in meme stocks this time?
Of course, at this stage it is difficult to say whether the rise in meme stocks will be different this time. However, the LunarCrush platform has reportedly seen a significant surge in social activity surrounding GameStop.
According to the company, since Roaring Kitty’s last post, social interactions have increased by 162.9% and the number of posts created has increased by 37.6%, with more than 11.3 million interactions observed. The rise in social performance has coincided with a sharp increase in the company’s share price and trading volume, highlighting the significant impact of social media on financial markets.
GameStop shares jumped more than 74% on Monday before rising 60% on Tuesday. It’s up 100% year to date, while it’s up 219% in the past month.
Sentiment scores on LunarCrush show that 33% of interactions are positive, with YouTube leading as the platform with the most positive sentiment towards GameStop at 52.3%. In addition, LunarCrush notes that the positive sentiment is reflected in the active participation of 3,020 creators who collectively created more than 8,521 posts, leading to active dialogue about the future of the stock.
The firm believes that if meme stocks can maintain gains for several weeks, it could “renew excitement in the markets, particularly among retail traders who have been largely dormant.”
“Until now, the Robinhood trader has been apparently inactive and has had little or no participation in market offerings,” they write. “A modest but steady rise in meme stocks could well galvanize this group.”
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LunarCrush believes that retail traders who have been in 5% money markets for over a year are now showing a growing appetite for higher returns.