After being dormant for a long time, the meme title craze is back in action. GameStop (NYSE:GME) rose 100 percent this week, while AMC Entertainment (NYSE:AMC) experienced even greater growth.
What triggered the boom in GameStop's stock?
There does not seem to have been any radical transformation in the companies involved, as they are also having a difficult time on the financial front.
The key seems to have been the resurgence of Twitter activity by “Roaring Kitty.” During the original GameStop stock rally, Keith Gill, a young investor from Massachusetts, bought shares from the beginning along with other experienced investors such as Michael Burry.
Gill often shared his insights on YouTube as user “Roaring Kitty.” The last time Reddit had mentioned him, Gill had shared screenshots of his investments that could have netted him $30 million if sold at the right time.
More money meant more problems. Gill also faced some legal controversy and testified before Congress, but then disappeared from the radar for a while.
However, last Sunday he returned to Twitter and posted some video memes that were interpreted by thousands of people as a signal to invest heavily in GME options. But another interesting factor comes into play here: last week, analysts noticed strange activity in GME's short-term options. Interactive Brokers (NASDAQ:IBKR) chief strategist Steve Sosnick shared his analysis with Bloomberg. Is this just a coincidence? Or is there something more behind these actions? due interpretation is up to you.
Is it worth trying to invest in these stocks? Certainly yes, but it is important to enter the market at the right time and sell after a few days to avoid losses. In the long run, what matters is fundamental analysis, and thanks to INVESTING PRO, which is able to analyze companies, it is possible to avoid big losses by investing in poor-quality stocks.
INVESTING PRO's chart is clear: stocks are not doing well and therefore should be avoided for long-term investments. They are tremendously overvalued and can lead to money losses rather than gains over the long term.
The likelihood of another epic rally like in 2021 is very low because the current situation is different. The short interest rate is significantly lower and the market has become more efficient, with a more savvy public tending to cash in on profits.
Although GME's current financial situation is not dire, the company is experiencing a steady decline in revenues. To keep up, it will have to continue to cut costs even faster.
This can be a difficult task for a retailer, as many expenses are fixed and cannot be easily reduced. GameStop's latest earnings report reflects this difficult situation and showed very negative results.
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