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- Fool me twice? It appears GameStop meme investors got suckered — again.
- Investors who jumped into the latest online frenzy over shares of the struggling video game retailer lost $13.1 billion in just three days from the mania’s high.
- “The resurgence of Roaring Kitty’s influence on meme stocks like GameStop demonstrates the power of social media and individual investors in shaping market dynamics,” said Tobi Opeyemi Amure, a market analyst.
GameStop’s recent stock surge and subsequent decline serve as a stark reminder of the volatile nature of meme stocks and the risks involved in speculative trading.
Fool Me Twice?
The GameStop 2.0 madness started last week when a vague post on X (former Twitter) by online influencer “Roaring Kitty” stoked animal spirits for meme stocks. GameStop’s price peaked at 64.83 on May 15, a 271% rally in just a few days.
Quick Gains and Rapid Losses
But the frenzy faded just as fast. The stock’s gain during the week is down to 27%. Anyone who got in late suffered even more. The stock is now down 66% from its high to 22.22. Other investors dumping shares aren’t the only ones outfoxing the dumb money. Even the company itself is cashing in.
Game Over For GameStop?
Investors who got caught up in the meme mania must make a decision. Lock in losses or wait for the redemption story. It’s best to unplug based on data from longtime industry analyst Michael Pachter at Wedbush. His 12-month price target on the stock is just 7 a share. If he’s right, that means there’s still 68% downside coming. Video game console sales are slowing and disappointing. Meanwhile, new ways to buy games digitally will only erode GameStop’s reason to even exist.
Conclusion
Ironically, the dumb money that bought the shares is the company’s best hope to avoid death, Pachter said. “Ultimately, the company must deploy its cash productively or continue to hope that it can issue more shares at elevated levels to forestall the inevitable,” he said.
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