The meme stock phenomenon appears to be making a comeback, with shares of GameStop (NYSE and AMC Entertainment (NYSE ) recently seeing significant gains.
This renewed interest is fueled by a resurgence of retail investor enthusiasm, reminiscent of the frenetic trading activity that once took these stocks to unprecedented heights. The question now is: are meme stocks back?
What are meme stocks?
Meme stocks are stocks of companies that are gaining popularity and seeing dramatic price movements due primarily to publicity on social media and online forums, rather than the underlying financial performance or fundamentals of the company. These stocks often become the subject of viral memes and extensive discussions on platforms like Reddit, particularly in communities like r/WallStreetBets.
Why are meme stocks rising again?
After a long break, Keith Gill, known as “Roaring Kitty” on social media, returned Sunday night and posted for the first time on x (formerly twitter) in almost three years. The publication has revived the enthusiasm of individual investors. This resurgence coincides with a further rally in GameStop's stock price, as well as a jump in AMC Entertainment's meme stock.
Speaking to Investing.com, Joe Vezzani, CEO of LunarCrush, a social intelligence company that provides insights into how social sentiment can drive stock prices, said retail traders are “rejoicing in the return of Roaring Kitty “.
“Roaring Kitty's return not only boosted GameStop's stock but also underscored the power of individual investors in today's market, especially when brought back by a charismatic leader,” Vezzani says.
“His initial posts years ago on Reddit under the name DeepF——Value and subsequent actions catalyzed a historic trading frenzy that shook Wall Street to its foundations, challenged hedge funds and sparked a reevaluation of regulations. commercial”. 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 around.
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“In a world of swapping narratives, Roaring Kitty's return is bullish for small caps and cryptocurrencies,” he adds.
How is the meme stock rally different this time?
Of course, at this stage it's difficult to assess whether the meme stock rally is different this time. However, the LunarCrush platform is said to have captured a significant increase in social activity around GameStop.
According to the firm, since Roaring Kitty's last publication, social interactions have increased by 162.9% and publications created by 37.6%, with more than 11.3 million interactions observed. The rise in social metrics has coincided with a sharp rise in the company's share price and trading volume, highlighting the significant influence of social media on financial markets.
On Monday, GameStop shares rose more than 74%, followed by a 60% rise on Tuesday. Year-to-date, it is now up 100%, while in the last month it is up 219%.
When assessing sentiment on LunarCrush, it indicates that 33% of interactions are positive, with YouTube leading as the platform with the most positive sentiment towards GameStop at 52.3%. Additionally, LunarCrush notes that the positive sentiment is reflected in the enthusiastic engagement of 3,020 creators who have collectively generated more than 8,521 posts, driving robust dialogue about the future of the stock.
The company believes that if meme stocks can maintain a rally for several weeks, this could “reignite enthusiasm in the markets, particularly among retail traders who have been largely inactive.”
“Until now, operator 'Robinhood' has been conspicuously inactive, with little presence in market offerings,” they write. “A modest but persistent rally in meme stocks could well revive this group.”
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LunarCrush believes that retail traders, who have been parked in 5% money markets for over a year, are now showing a growing appetite for higher returns.
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