Every investor undoubtedly still remembers the remarkable stock market gains of the video game retailer GameStop a few years ago. Now, Wall Street has found a new meme stock in the American real estate platform Opendoor.
Key takeaways
The meme craze is back after a few years. This time, retail investors have set their sights on Opendoor.
That stock has gained more than 200 percent over the past five days. Compared to a month ago, the share price has even risen by 500 percent.
Analysts do point out the dangers of investing in meme stocks. The price can suddenly drop sharply. That’s exactly what happened with GameStop.
In the news: Opendoor is up about 500 percent compared to a month ago. The real estate platform has performed particularly well on the stock market in recent days. In the past five days alone, the share price has soared by about 200 percent. At the time of writing, a share is trading at $3.20.
This remarkable surge brings to mind the stock market performance of GameStop at the start of 2021. In January, the share price peaked at around $480 (intraday). At the end of December (2020), a share cost just over $4.
This price increase was the result of several posts and analyses by Reddit user Roaring Kitty. He called on people to buy shares en masse. What followed was a short squeeze, where the rising share price forced short sellers (investors who bet on price declines, ed.) to close their positions, giving the stock an extra boost.
Melvin Capital, one of the hedge funds betting on a decline in GameStop’s price, lost about 50 percent of its portfolio value.
One person behind Opendoor’s surge
Noted: Just like with GameStop, one person is responsible for the meme frenzy.
Eric Jackson, founder of the Toronto-based hedge fund EMJ Capital, stated on X that he is optimistic about Opendoor’s future. Yet, the company has closed every year so far with losses. Negative operating results are also expected for this year and next. Nevertheless, Jackson manages to convince enough retail investors to buy the stock.
In one of his most recent posts on X, the EMJ Capital CEO notes that the stock is already being followed by 39,000 people on the social platform StockTwits. For comparison: GameStop has 306,000 followers.
There also appears to be a short squeeze at Opendoor. As of the end of June, one in four shares was sold short. That’s only a fraction of GameStop’s so-called short float in 2020. At one point, more than 100 percent of the shares were shorted.
Investing in meme stocks is not without risks
Attention: Analysts warn that investing in meme stocks remains particularly risky.
“These speculative stocks can see spectacular rises, but in the long run, it’s still the company’s results that matter. Investors need to keep that in mind,” says Josh Jamner, analyst at ClearBridge.
That’s also what happened with GameStop. After the price peaked at $400, it dropped to around $10 in the following two weeks. Today, you pay about $24 for a share of the video game retailer.
GameStop Corp. offers games and entertainment products through its stores and ecommerce platforms. The Company operates in four geographic segments: United States, Canada, Australia and Europe. Each segment consists primarily of retail operations, with the significant majority focused on games, entertainment products and technology. The Company has a total of approximately 3,203 stores across all of its segments: 2,325 in the United States, 193 in Canada, 374 in Australia, and 311 in Europe. Its stores and ecommerce sites operate primarily under the names GameStop, EB Games and Micromania. Its Australia and Europe segments also include 38 pop culture-themed stores selling collectibles, apparel, gadgets, electronics, toys and other retail products for technology enthusiasts and general consumers in international markets operating under the Zing Pop Culture brand. Its retail stores are generally located in strip centers, shopping malls and pedestrian areas.
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