Are meme stocks back? GameStop, AMC surge on strong retail demand

The phenomenon of meme stocks appears to be making a comeback, with shares of GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) recently experiencing significant surges. 

This renewed interest is driven by a resurgence in retail investor enthusiasm, reminiscent of the frenzied trading activity that once sent these stocks to unprecedented heights. The question now is,  are meme stocks back?

What are meme stocks?

Meme stocks are shares of companies that gain popularity and see dramatic price movements primarily due to social media hype and online forums rather than the company’s underlying financial performance or fundamentals. These stocks often become the subject of viral memes and extensive discussion on platforms like Reddit, particularly in communities such as r/WallStreetBets.

Why are meme stocks rallying again?

After an extended break, Keith Gill, known as “Roaring Kitty” on social media, made a comeback on Sunday evening posted for the first time on X (formerly Twitter) in almost three years.  The post has reignited the enthusiasm of individual investors. This resurgence coincides with further rally in GameStop's stock price as well as a jump in fellow meme stock AMC Entertainment. 

Speaking to Investing.com, Joe Vezzani, CEO of LunarCrush, a social intelligence company that provides insights into how social sentiment can drive stock prices, said retail traders are “rejoicing with the return of Roaring Kitty.”

“Roaring Kitty's comeback not only boosted GameStop's stock but also underscored the power of individual investors in today’s market, especially when rallied by a charismatic leader,” says Vezzani. 

“His initial posts years ago on Reddit under the moniker DeepF------Value and subsequent actions catalyzed a historic trading frenzy that shook the foundations of Wall Street, challenged hedge funds, and sparked a reevaluation of trading regulations.” Vezzani believes this could be the catalyst the markets are looking for to break through the inflation and interest rate noise, giving the everyday investor something to rally around. 

“In a world that trades narratives, the return of Roaring Kitty is bullish for small caps and crypto,” he adds. 

How is the meme stock rally different this time?

Of course, assessing whether the meme stock rally is different this time is difficult to tell at this stage. However, LunarCrush’s platform is said to have captured a significant spike in social activity surrounding GameStop. 

According to the firm, since Roaring Kitty's latest post, social interactions have increased by 162.9%, and posts created have increased by 37.6%, with more than 11.3 million interactions observed. The surge in social metrics has coincided with a sharp increase in the company's stock price and trading volume, highlighting the significant influence of social media on financial markets.

On Monday, GameStop shares jumped by more than 74%, following that up with a 60% rise on Tuesday. For the year-to-date, it is now up 100%, while over the last month, it has surged 219%. 

When assessing sentiment on LunarCrush, it indicates that 33% of the interactions are positive, with YouTube leading as the platform with the most positive sentiment towards GameStop at 52.3%. Furthermore, LunarCrush notes that the positive sentiment is reflected in the enthusiastic engagement of 3,020 creators who have collectively generated over 8,521 posts, driving a robust dialogue about the stock's future.

The firm believes that if meme stocks can sustain a rally for several weeks, it could “reignite excitement in the markets, particularly for retail traders who have been largely inactive.”

“Until now, the ‘Robinhood’ trader has been conspicuously dormant, with little presence in market bids,” they write. “A modest but persistent rally in meme stocks could very well reactivate this group.”

LunarCrush feels that retail traders, who have been parked in 5% money markets for over a year, are now showing a growing appetite for higher returns.