Graphic: Love them or hate them, meme stocks are back

BlackBerry

15/05/2024 06:00

By Saqib Iqbal Ahmed and David Randall
       NEW YORK, May 15 (Reuters) - Meme stocks are soaring
again, delighting fans, frustrating detractors and showing Wall
Street that the social media force behind the wild GameStop
 GME.N  rally in 2021 is still going strong.
    The American video game retailer is again the star, shooting
up 340% over the last 10 trading days after a string of posts on
the X platform from an account linked to Keith Gill, the central
figure behind the previous frenzy.
    Shares of other companies, including theater chain AMC
 AMC.N  headphones maker Koss  KOSS.O  and food storage
container company Tupperware  TUP.N  have followed suit. Like
GameStop, many of the stocks are heavily shorted and their
fundamentals have declined over the last few years. 
    "It's hard not to use words like 'insane' when you look at
this as a trader," said Jay Woods, chief global strategist at
Freedom Capital Markets. "The first time this happened, it was
more of a movement, but right now this looks like a craze where
people are saying, 'Here's an opportunity' and 'Let's see if we
can make a quick buck off of it.'"
    Here is a quick, chart-based look at some of the factors
driving the resurgence of the meme stock phenomenon.
    Despite their recent stunning gains, GameStop and other meme
stocks still have a ways to go before they match the advances in
2021. GameStop shares shot up as much as 1,700% that year, while
AMC's surged 2,850% and U.S. listed shares of Blackberry rose
nearly 280%.
    

    Many of these companies have been the target of short
sellers - investors who look to profit from selling borrowed
shares betting the stock price will fall.
    Short interest in GameStop climbed steadily this year before
hitting a 20-month peak of 25% in mid-April, a couple of weeks
before the shares started rallying.
        That is well below the peak level of short interest in
October 2020 when about 107% of the free share float for
GameStop was sold short, exchange data shows. 
  
    The rallies have dealt short investors a heavy blow. In
GameStop alone, year-to-date paper losses totaled $1.28 billion,
estimates from ORTEX showed.
    Still, there was little indication that a short squeeze -
which occurs when a rising stock price forces bearish investors
to unwind positions and buy back shares - is underway, said
Peter Hillerberg, co-founder of ORTEX technologies. 
    "Calling it a squeeze may be a bit early." 

    Options trading has surged along with the latest meme stock
rally, with much of the action concentrated in bullish call
options, which profit when stock prices rise. 
    On Tuesday, GameStop options volume hit 818,843 contracts,
the highest since March 2021. For AMC, 1.9 million contracts
changed hands, the most in about nine months, according to Trade
Alert data.
    Trading data shows retail activity has picked up
significantly over the last month, but is "still a far shout
relative to peak meme mania days," Marco Iachini, senior vice
president at Vanda Research, said in a note.
    "We think retail's hand has been significant in pushing GME,
AMC and other meme stocks higher Monday, and so far on Tuesday."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Meme stocks    https://reut.rs/4bnrOH5
Just getting started?    https://reut.rs/4amsk75
Sinking shorts    https://reut.rs/3wokBaI
Short interest    https://reut.rs/4dDYpKm
Options mania returns    https://reut.rs/3QK52kC
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Saqib Iqbal Ahmed and David Randall; Editing by
Ira Iosebashvili and Richard Chang)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 332 219
1971; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))