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Not Just AMC: These Are The Meme Stocks Reddit Traders Are Pumping Again
June 3, 2021
May 26, 2021
Shares of movie theater chain AMC Entertainment and brick-and-mortar retailer GameStop, two of the top meme stocks embroiled in a late-January trading frenzy, have posted a stunning run this month, surging nearly 50% and 35%, respectively, as Reddit traders continue to plow into the highly shorted stocks despite still-bearish forecasts from analysts—one of several signs that risky market activity is still running full force.
As of 3:15 p.m. EDT, AMC shares were soaring 10% Monday to more than $15 apiece, lifting the stock to its highest level since a closing high this year of $19.90 on January 27—right before a slew of meme stocks started crashing more than 70% in a matter of days.
Signaling that frenzied trading once again fueled a short squeeze, AMC short interest rose to a record high in mid-April before falling by month's end as trading volume and prices surged well into this month, likely forcing the institutional investors betting on a price decline to cut their losses by buying back shares at higher prices.
GameStop shares, on the other hand, were surging nearly 17% to roughly $210, just under the stock's latest highs in March after the firm tapped Chewy founder Ryan Cohen to head up its digital transformation and serve as board chair.
In hundreds of thousands of comments over the past few days, Reddit traders have celebrated the rallies, with one user garnering 4,000 upvotes Tuesday by reposting a tweet reading: "Wall Street clearly underestimated a generation raised on highly coordinated Friday night World of Warcraft raids."
Despite the celebratory retail traders, analysts are still overwhelmingly bearish on shares: Citi's Jason Bazinet reiterated a sell rating for AMC Thursday and issued a price target of just $3.70, saying the company's high debt load adds to the risk of its uncertain recovery from the pandemic, as more studios forgo theater releases in favor of at-home streaming.
AMC shares hold an average one-year price target of about $5.11 on Wall Street, giving the stock nearly 63% downside from current levels, according to financial analytics site Ortex, while GameStop's average price target of $48.17 sits more than 75% below current levels.
“When looking at the comments themselves, there’s a clear desire for a short squeeze either today or very soon," Travis Rehl, the founder of social media analytics platform HypeEquity told Marketwatch last week of the booming social media activity rallying around GameStop and AMC shares.
Much like other speculative pockets in the market, shares of AMC and GameStop have posted incredibly volatile runs this year despite holding on to staggering gains. After crashing nearly 90% from their late-January highs, GameStop shares are still up more than 1,100% over the past year, and AMC shares have nearly tripled in the same period. "Retail investors have proven themselves to be an astute lot, successfully navigating [investing] themes—and not to mention headline-grabbing activity in meme stocks—throughout the pandemic," says BTIG chief equity and derivatives strategist Julian Emanuel, noting that at-home traders have also driven a raging mania around cryptocurrencies and buzzy non-fungible tokens—two areas that have also suffered from unusual volatility this year.
Regulation. “Many of our regulations were largely written before these recent technologies and communication practices became prevalent,” Gary Gensler, the new chair of the Securities and Exchange Commission and a forceful regulator after the Great Recession, said in prepared remarks during a Congressional hearing about meme-stock volatility this month. "We need to evaluate our rules, and we may find that we need to freshen up our rule set.”
Dalian Wanda, the Beijing investment firm founded and controlled by Chinese billionaire Wang Jianlin, trimmed its AMC stake to just 0.002% last week. "With no controlling shareholder in place, now, AMC will be governed, just as most other publicly traded companies, with a wide array of shareholders,” AMC CEO Adam Aron said in a statement about the move, which triggered a massive runup in prices. After buying into AMC in 2012, Wanda controlled more than 60% of the firm's voting shares.
Source: Forbes
Image Source: Getty Images
