GameStop soars on short squeeze after swinging to profit, meme stocks rally (updated)

KOSS

22/03/2023 14:28

(Adds short interest, comment, background; updates prices)
    By Medha Singh
       March 22 (Reuters) - Meme stock GameStop Corp  GME.N 
jumped nearly 50% in early trading on Wednesday as the video
game retailer's first profitable quarter in two years squeezed
bearish investors and ignited a surge in other stocks popular
among retail traders.
        AMC Entertainment Holdings Inc  AMC.N  gained 5.3%,
while Bed Bath & Beyond  BBBY.O  rose 7.5%. Both shares, along
with GameStop, were at the heart of a meme stocks frenzy in 2021
driven by small investors coordinating on social media.
        Among other stocks popular with retail investors, Koss
Corp  KOSS.O  climbed 9.5%, while the Roundhill MEME ETF
 MEME.P  rose 4.2%.
    Grapevine, Texas-based GameStop, in which billionaire
investor Ryan Cohen holds a majority stake and serves as
chairman, recorded a 16% decline in costs during the quarter and
surprised Wall Street analysts with a profit.
        Investors saw this as an early sign of turnaround for
GameStop, whose core business of selling new and pre-owned
videogame disks is shrinking as consumers move to downloading
games digitally or streaming.
  
    GameStop was the most-touted stock on investor-focused
social media site stocktwits.com.
        The stock hit its highest level in more than four months
with 12.7 million shares changing hands in the first 15 minutes
of trading, among the top five most traded U.S. stocks.
  
        "Luckily, this go around is not due to meme investors,
but an actual tangible fundamental event," said David Wagner,
portfolio manager at Aptus Capital Advisors.
  
        "Short interest has been a driver in this stock for
quite some time and that will also be the case today."
  
        
  
        SOURING SHORT BETS
  
        When there is a rush of demand from short sellers
looking to exit their bearish bets amid a rise in a stock's
price, it pushes prices even higher, resulting in a short
squeeze.
  
        
    Carvana Co
      CVNA.N , another stock with high short interest, jumped
20% after the used-car retailer said it expects a smaller core
loss in the current quarter.
  
        Short sellers betting against GameStop have lost $610
million since the start of the week, analytics firm Ortex
estimated, adding that about 24% of GameStop's publicly
available shares were in short position.
  
        Wedbush raised its price target on GameStop's shares to
$6.50 from $5.30 after the results, as the brokerage believes
the lower cost structure reduces the risk of ongoing losses.
  
        However, "longer term, the company cannot save its way
to prosperity," Wedbush analyst Michael Pachter said.
  
    "I would continue to bet my first born male that this
company will be irrelevant in the coming few years," said
Wagner, who doesn't have a position in GameStop.  

 (Reporting by Medha Singh in Bengaluru; Editing by Maju Samuel
and Saumyadeb Chakrabarty)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))