Last year marked the birth of modern “meme mania” — the heavy bidding of certain stocks that appeal to an engaged and passionate retail investor base. GameStop stock (GME) - Get GameStop Corp. Class A Report pioneered the movement, which is about to turn one year old in a few days.
What could be better to celebrate this anniversary date than another rally in GME and some of its meme peers? The popularity of NFT, or non-fungible tokens, could be the spark that ignites another buying frenzy. Wall Street Memes explains how.
(Read more from Wall Street Memes: Could These 3 Meme Stocks Work As a Hedge Strategy?)
NFT puts the spotlight on GME
On Thursday, after the closing bell, the Wall Street Journal reported that GameStop has been gearing up to enter the NFT space. The retailer is said to have hired over 20 people to run a business around non-fungible tokens, which would include the development of a marketplace service. The launch of this platform could happen later in 2022.
At the same time, GameStop is allegedly exploring opportunities in crypto and blockchain. The details about this venture are still unclear at this moment. Still, the rumors were enough to send GME stock higher by as much as 30% in after-hour activity, on January 6.
(Read more from Wall Street Memes: Alibaba Stock Has 60%+ Upside Potential For 2022, According To Wall Street)
GME and meme mania: quick overview
Only one year ago, GME shares traded at a modest $18 and market cap of $1.2 billion. For years, the company had been battling the secular decline in brick-and-mortar retail, the shift of gaming habits to mobile and cloud, and a long hiatus in the gaming console cycle.
But with the snap of a finger, GME share price soared to nearly $350 by late January 2021, rising by a factor of about 20 times in only three weeks. The reason? Not much more than overwhelming demand, according to the SEC, fueled by frequent mentions on discussion boards and broad coverage in mainstream media.
Despite another couple of rallies that took place in the first half of 2021, meme mania took a pause in the last six months of the year. Between late June and the end of December, GME fizzled and the share price declined 50%. Some even claimed that meme buzz had already been left in the rearview mirror.
Why this could be big news
The debate of whether GameStop will be successful at executing on its NFT and crypto vision is irrelevant to the short-term bullish case on GME stock. It is well understood that business fundamentals are usually not a key factor in driving the intense rallies witnessed in GME and other meme targets since the start of last year.
But the recent developments may be enough to draw the attention of retail investors once again. The charts below show the massive increase in popularity that GME has seen after the end of Thursday’s trading session.
GME was, by far, the most mentioned ticker on Reddit as of the writing of this paragraph over the prior 24 hours: nearly three times more than runner-up SPDR S&P 500 ETF Trust (SPY) - Get SPDR S&P 500 ETF Trust Report.
Increased popularity is only one piece of the puzzle. According to Yahoo Finance, nearly 20% of GME’s float was shorted as of mid-December — a very high number. It would take over three days of average trading activity for shorts to fully unwind their positions. Combine buzz with elevated shorting, and one might have the recipe for a rally.
The next couple of days could be big for the meme movement. Not only did GME trade substantially higher after the closing bell, AMC stock (AMC) also jumped around 7% — despite GameStop’s developments being largely irrelevant to the movie theater operator.
Interestingly, AMC also experienced a brief jolt in investor optimism when its management team addressed some of the same topics, a couple of months ago. But in that case, momentum quickly fizzled out. Will GME investors have better luck this time?
GameStop is making moves to enter the NFT and crypto spaces, according to the Wall Street Journal. Will this be a catalyst that reignites meme mania in 2022, or just noise that should be ignored?
(Read more from Wall Street Memes: 3 Reasons Why AMC Stock May Bite Short Sellers in 2022)
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)