Equities

GameStop, AMC Rally 34% and 41% in Meme-Stock Surge

GameStop and AMC stocks soar, reviving meme-stock frenzy with significant trading volumes and broad market impact.

By Bill Bullington

5/15, 05:49 EDT
AMC Entertainment Holdings, Inc.
Lucid Group, Inc.
Rivian Automotive, Inc.
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Key Takeaway

  • GameStop and AMC stocks surged by 34% and 41% respectively, extending the meme-stock rally with significant trading volume spikes.
  • Retail investors poured $16 million into GameStop and $37 million into AMC, highlighting continued enthusiasm in meme stocks.
  • Despite rallies, skepticism remains about sustainability due to fundamental value disconnects and altered short-selling dynamics.

Meme-Stock Resurgence

GameStop Corp. and AMC Entertainment Holdings Inc. have witnessed a significant resurgence in trading activity, marking a notable revival of the meme-stock phenomenon that captivated markets during the pandemic. GameStop's stock soared by 34%, while AMC's stock surged by 41% in premarket trading on Tuesday, following a rally of more than 70% for both stocks on Monday. This revival was sparked by social media activity from Keith Gill, known as "Roaring Kitty," who had previously been a central figure in rallying day traders on Reddit to squeeze short sellers of GameStop in 2021.

Trading Volume and Retail Investment

The trading session on Monday saw a spike in option volume for GameStop and AMC, reaching levels not seen since July 2022, with nearly 700,000 contracts traded. This activity included a significant uptick in both call and put volume, indicating a more diversified trading strategy compared to the predominantly call-focused trading of the past. Retail investors demonstrated their enthusiasm by injecting $16 million into GameStop and $37 million into AMC, as reported by Giacomo Pierantoni, head of data at Vanda Research.

Impact on Other Stocks

The rally extended its influence beyond GameStop and AMC, propelling other high-risk and heavily shorted stocks such as Rivian Automotive Inc., Lucid Group Inc., and various companies within the electric vehicle and charging station sectors. This expansion of the meme-stock trading dynamic underscores its broader impact on the market, affecting a diverse array of companies beyond the initial targets of GameStop and AMC.

Challenges and Market Dynamics

Despite the recent surge, both GameStop and AMC's stock prices remain significantly below their peaks in 2021, underscoring the volatile nature of meme-stock trading. Analysts have expressed skepticism about the sustainability of these rallies, pointing to a disconnect between trading activity and the fundamental values of the companies involved. For instance, GameStop's trading at a price-to-earnings multiple far exceeding industry norms raises questions about the long-term viability of its stock price. Moreover, the percentage of shares sold short has decreased from the extreme levels observed in 2021, indicating a shift in market dynamics that could potentially alter the impact of retail trading strategies.

Street Views

  • Ben Laidler, eToro (Neutral on GameStop Corp. and AMC Entertainment Holdings Inc.):

    "This time it is different... The pandemic lockdown is over. Excess consumer savings are largely long spent. Short positions in these stocks are much smaller though not small. Interest rates are much higher."

  • Giacomo Pierantoni, Vanda Research (Cautiously Optimistic on meme-stock rally depending on CPI data):

    "Overall, the likelihood of this meme rally persisting will depend on the CPI print today... a risk-off event will scare retail traders off and push purchases back into traditional products," while a softer reading on inflation "will probably generate another leg higher."