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GameStop’s ‘Roaring Kitty’ Rise Doesn’t Mean Meme Stock’s Bull Has Legs
GameStop (GME) and AMC (AMC) are rising againwith both stocks rising more than 100% in the past week.
While the moves are sending Market Vibrations That Sound Like the Meme Stock Craze of 2021Wall Street strategists say this new burst of enthusiasm is far from the madness of three years ago.
In a research note on Tuesday, Vanda Research Senior Vice President Marco Iachini wrote that his team believes more retail interest could emerge in the names in the coming trading sessions, but the chances of a repeat in 2021 are “ casualties.”
“These days, Quant/hedge funds are much better equipped to deal with these situations,” Iachini wrote. “In fact, we believe the chances that they will participate alongside retail in the crisis, but also lean in and exit these negotiations before retail traders, are high.”
The upward moves in both stocks, which have since been followed by multiple trading halts and subsequent paring of gains on Tuesday, came after the resurgence of Keith Gillalso known as “Roaring Kitty”, whose positive case at GameStop triggered the 2021 meme stock rally.
But at this stage, market action is still a long way from the level of retail inflows seen in 2021. On Monday, GameStop recorded net inflows of $15.8 million, while AMC attracted $37.5 million , according to data from VandaTrack. In January 2021, one-day peak inflows were $87.5 million and $170 million for GameStop and AMC, respectively.
“Both stocks have seen an increase in flows, but the magnitude remains just a fraction of what we witnessed at the start of 2021,” Iachini wrote.
In a note to clients on Tuesday, Nicholas Colas, co-founder of DataTrek, noted the differences between this moment in the meme market and 2021.
“Retail traders aren’t just sitting at home with little to do other than trade stocks,” Colas wrote. “The federal government didn’t just roll out trillions of stimulus money. Yes, we’re sure we’ll be hearing more about meme stocks in the coming weeks, but not with the same fervor as three years ago.”
GameStop, AMC, Reddit, Robinhood, WallStreetBets, stock charts and logos photographed on Apple devices. (STRF/STAR MAX/IPx) (STRF/STAR MAX/IPx)
With other stocks also joining the rally, such as Sunpower (SPWR), which soared more than 80% on Tuesday Amidst a small squeeze, the question facing investors is whether this risk-on environment will proliferate across the market and create a bubble-like atmosphere.
Colas explains that we are not close to that level at the moment.
“Every bull market has its share of excess, but this only becomes dangerous when it becomes widespread. Examples would be dotcom stocks in the late 1990s and speculative small caps in 2021,” Colas wrote. “The flurry of activity around GME today is normal, even if it harkens back to past market follies.”
The story continues
Capital Economics chief markets economist John Higgins agreed this doesn’t look like past bubbles.
“Even as interest in ‘meme’ stocks recovers following a further rise in GameStop’s share price, some of the telltale signs that a broader stock market bubble may be entering its final stages – such as excessive leverage – are absent,” Higgins wrote. .
A chart from Capital Economics shows that in previous bubbles, including the rise of meme stocks in 2021, margin debt rose in line with the S&P 500. Notably, that is not happening at the current time.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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