Meme stocks are largely companies with brands that are recognizable to some degree to individual investors, compared with other stocks that may not have as much resonance with regular investors. It’s been more than 4 years since meme stocks emerged in the midst of the global pandemic. In case you haven’t stayed abreast of the meme stock craze, here’s a quick primer. It could also be worth comparing a company’s valuation to that of similar companies. One method for doing this is to look at 12-month share price forecasts, available via online investing platforms. The company’s share price jumped 16% in May 2024 – likely in response to Keith Gill’s return to social media, and is now trading around $3.20.
But more than a year after the coronavirus pandemic was declared, things look to be perking up. Strong adult vaccination uptake in the U.S. and relaxed coronavirus restrictions in many states has resulted in positive operating income before depreciation and amortization in 127 of its 138 stores, as of May 2, top remote mariadb developers pre-vetted 2021. This means that meme stocks often have a price which doesn’t reflect the true estimated value of the firm that has issued them. One of the most famous is GameStop, which soared in value earlier this year, apparently in response to a single posting by an influencer known as Roaring Kitty. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price.
Why Are They Called Meme Stocks?
BlackBerry’s share price soared from $6.63 to $14 within the space of a month during January 2021’s meme stock frenzy, before steadily declining. NerdWallet, Inc. is an independent publisher and comparison service, not an investment topfx ltd authorised and regulated by cysec advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
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As a result, hordes of investors started buying GameStop stock, making it very expensive for the hedge funds to buy back from their short positions. Specifically, these retail traders are attempting to effect short squeezes in heavily short-sold stocks. This creates an event where short-sellers run for the exit, causing a rapidly rising stock to skyrocket higher as short-sellers buy to cover their position. Video game and accessories retailer GameStop is the perfect example of what can happen when the conditions are absolutely perfect for a short squeeze. So many of today’s meme stock investors feel they need to make a large amount of money – and fast.
By contrast, a legitimate meme stock movement is typically accompanied by a slow rise in posts and interest that catches fire and takes off, like with GameStop in late January. Bot manipulation, where automated accounts post and upvote others’ posts on one’s behalf, is more malicious and harder to prove, Rehl said. So-called “bot farms,” where people pay for fake accounts in the dozens, hundreds, or even thousands, plague the internet, and Rehl said it can be hard to tell if accounts are real or fake. The other catalyst, as you might expect, is the right recipe for a short squeeze. As of May 28, a little over 7.8 million shares of the company were held short.
The YouTube persona Roaring Kitty posted a future viral video laying out the case for why shares of brick-and-mortar video game retailer GameStop Corp. (GME) could soar from $5 to $50 per share in August 2020. At the same time, this contributed to short squeezes (where short sellers cover their short positions by buying the stock back, effectively driving the price even higher), helping these previously beaten down stocks soar. At the heart of the meme-stock movement is an online investment community known as WallStreetBets (WSB) which uses Reddit to exchange ideas and information about investments. This community – made up of “social retail traders” rather than industry professionals – is driven by rumour and social media postings, rather than traditional financial information.
- Investing in low-cost index funds and through tax-advantaged retirement accounts such as IRAs has a higher likelihood of success than relying on risky investing strategies.
- In January 2021, Nokia’s share price jumped 106%, causing a short squeeze.
- The entire EV space (cars and ancillary products/services) is dependent on innovation.
- Equally worrisome, the company’s current liabilities ($279.2 million) are well over double its current assets ($111.4 million).
What the Latest Craze Says About Investor Behavior
Again, doesn’t sound like much — but it’s quite a bit when the total float is only 28.3 million shares. It’s also worth noting is that Intercept only sees an average of 1.11 million shares trade hands daily. Thus, it would take well over five days for short-sellers to completely exit their positions.
AMC’s 5-Year Share Price Performance
Reddit’s WallStreetBets page bans users that post “false or misleading information” and promoters of “any other worthless securities that are susceptible to scams or pump & dump schemes.” One reason retail investors are bound to like Intercept is its volatility. Intercept’s beta is north of 1.5, which means that, on average, it moves more than 50% more than the broader market. For example, if the benchmark S&P 500 rises 1%, we would expect to see Intercept up more than 1.5%. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
Whether as a result of stock purchases or options bets, meme stocks have rallied impressively on heavy volumes over the past year. Retail investors are also likely to remain keen to pick up on the latest meme stock. Dominated by younger investors, meme stocks are still seen as a way to generate outsized returns in a short period, especially in the face of rising housing costs and inflation in general. But meme stocks also remain very volatile and risky, and retail investors are likely to be the ones to experience the most losses when it all comes crashing down. A meme stock is one whose trading activity is pumped up via social media—particularly on Reddit, X, and YouTube.
The trend emerged as lockdown measures kept would-be investors at home, commission-free trading apps such as Robinhood entered the scene and US citizens were deciding how to spend their Covid-19 government stimulus cheques. First, we provide paid placements to advertisers to present their offers. The payments we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market. In any case, I’d certainly recommend considering buying MSFT stock now .
However, they expressed doubt that the latest meme stock craze could reach 2021 levels in the days to come. “Do we think more retail traders can jump in on 6 essential skills for java developers the trend in the coming days? Yes. Do we think this is a repeat of 2021? No, and the chances we reach that stage are low.” Like GameStop, NOK stock jumped by an incredible amount in early 2021. Many retailer investors became interested in Nokia because of the high number of its shares that were being sold short by institutional investors and hedge funds. The surge of its stock wasn’t caused by any real changes in its underlying business. Rather, speculation and a stampede by retail investors resulted in a tremendous rally by GME stock which was unexpected by most.
Investing US$1,000 in an ISA or a savings account, even if it does exceptionally well, is not going to cut it, and will not provide the life changing return required to get on the property market. And the GameStop “short squeeze” (when a share price rises sharply) was certainly successful in alarming the professional traders who had been caught out. But concerns were also raised by financial regulators who knew little about these new kids on the financial block, with the numbers and power to affect market stability. Single stock ETFs have also recently been introduced, which provide leveraged long or short positions on a single stock. Only a small number of these have been approved for trading so far, but do include some meme stocks like Tesla and NVIDIA.