Shares of GameStop Corp fell more than 17% on Thursday and other so-called meme stocks also declined, setting the stage for another roller-coaster session for stocks favored by retail investors on social media platforms.
GameStop shares recently traded at around $249, after the video game retailer on Wednesday reported stronger-than-expected earnings, named the former head of Amazon.com Inc’s Australian business as its chief executive officer and said it may sell new shares. Wedbush Securities on Thursday raised its price target on the company to $50, from $39.
Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.
Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 11%, burger chain Wendy’s down 4% and prison operator Geo Group Inc , one of the more recently minted meme stocks, down 18%after surging more than 38% on Wednesday. AMC shares were off around 11%.
Still, the meme stocks “will likely remain a viable option for some traders if the S&P 500 index provides lackluster moves and continues to hover around record highs,” said Edward Moya, a senior market analyst at OANDA.
The benchmark S&P 500 has moved in a narrow range in recent weeks and was up around 0.4% in early afternoon trading.
The rally in heavily shorted U.S. stocks, which has also lifted shares of Medicare-backed insurance seller Clover and AMC, has drawn the attention of the U.S. Securities and Exchange Commission (SEC).
GameStop said on Wednesday the SEC had requested documents and information related to an investigation into that trading. The company’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.
In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday. That matched their peak in January, when the surge in GameStop shares squeezed short sellers and further boosted the stock price.
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