Meme stocks are surging again as big gains for AMC and GameStop suggest retail investors are shifting back to risk-on
- A resurgence in meme stocks suggests retail investors are getting comfortable taking on more risk.
- Shares of AMC Entertainment, GameStop, and Bed Bath & Beyond have soared in recent weeks, outpacing the S&P 500 considerably.
- All three companies were among the most traded stocks at Fidelity on Monday, suggesting retail investors are fueling the surge.
Since the June 17 bottom in the S&P 500, AMC Entertainment, Bed Bath & Beyond, and GameStop have surged 118%, 88%, and 44%, respectively. Meanwhile the S&P 500 has risen by just 15%. On Monday, shares of all three companies saw gains of at least 10% and as much as 40% in what looks to be a risk-on move driven by retail investors.
The considerable outperformance in meme stocks since mid-June suggests retail investors are getting more comfortable with taking on more risk in their portfolios after they saw big declines in some of their favorite stock holdings. While the S&P 500 peaked in early January and then fell as much as 23%, most fast-growing tech stocks popular with retail investors peaked in February 2021 and saw losses of as much as 80% for some securities.
But retail investors are making a comeback as the broader market finds its footing despite growing worries of an economic recession.
On Reddit's WallStreetBets forum, GameStop, AMC Entertainment, and Bed Bath & Beyond were all among the top 10 most talked about stocks on Monday, according to data from SwaggyStocks.
Meanwhile, data from Fidelity showed that AMC Entertainment was the most traded stock on its platform on Monday, attracting more than 6,000 buy orders. AMC's surge has also been helped by a slew of successful box office hits this summer and the company's recent decision to issue an "APE" preferred stock dividend to its investors.
GameStop and Bed Bath & Beyond were among the top 10 most traded stocks at Fidelity on Monday as well.
Whether the rally in meme stocks is sustainable remains to be seen. Nvidia issued a profit warning on Monday, saying that its expected revenue will fall by more than $1 billion in the quarter due to weakness in the gaming market that it sees continuing. That could be bad news for videogame retailer GameStop.
Meanwhile, Bed Bath & Beyond recently saw a management shakeup after it posted a bad miss in its quarterly earnings results, and uncertainty remains for AMC as the movie theater box office has yet to fully recover from the COVID-19 pandemic.
Despite the risks, retail investors are willing to take another bet on the meme stocks as their share prices rocket higher.
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