Meme stock mania is back. This time around, it's looking a little different.
Meme stocks saw a resurgence last month after Keith Gill, an investor who helped stoke the meme stock frenzy in 2021, made his first post on X in three years. Also known as "Roaring Kitty," Gill has since posted screenshots on Reddit that appear to show GameStop shares and call options worth hundreds of millions of dollars in his portfolio, stoking excitement among his devout followers. (CNN has not independently confirmed the screenshots.)
GameStop shares have surged roughly 75% and seen wild, unpredictable swings since that first post. Gill's fans last Friday flocked to his livestream, inundating the live chat with comments and questions. A video montage of kittens played before Gill himself finally appeared. The meme trader poured a beer during the stream and sported gaudy white sunglasses.
For many traders who experienced the original meme stock craze, the phenomenon has prompted a wave of deja vu. Still, there are key differences between the reignited 2024 meme stock craze and the original in 2021.
For one, trading volumes aren't nearly as high as they were three years ago. Daily trading volumes of GameStop shares peaked at roughly 789 million on January 22, 2021, when the stock popped 51%, according to FactSet data. The highest trading volume for GameStop so far this year was on June 7, when roughly 279 million shares traded hands — and the stock tumbled 39%.
The difference in volumes could be due to the drastic changes in the economy, on Wall Street and in the world during the last few years. In 2021, people were stuck at home due to the Covid pandemic, using their stimulus checks to buy everything from exercise equipment to ingredients for baking bread to stocks. Interest rates were near zero, and the US economy was booming.
Now, interest rates are at a 23-year high. Persistent inflation is eating into Americans' savings accounts. The economy remains resilient, but is showing signs of cooling as the Federal Reserve tries to bring down prices without triggering a recession. That has traders less willing to take on less investment risk compared to three years ago.
One thing that's stayed the same? GameStop, along with other meme stocks, is still lacking when it comes to its balance sheet, says Craig Sarembock, a wealth advisor at Bartlett Wealth Management.
While GameStop shares have surged in recent weeks, it is still down 65% from its record high closing price in 2021. The video game retailer reported last Friday a loss of $32.3 million during the first quarter, slightly better than the $50.5 million loss the prior year. Sales slipped to $900 million from $1.2 billion the year before.
"Can you trade [meme stocks] and make money? Absolutely. You can do that with any stock. But for long term investors, that is just an area I would avoid wholeheartedly," said Sarembock.
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