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GME Stock: Can It Still Play The Meme Game?

GameStop stock has been underperforming in recent weeks, returning to April levels. Are shares going downhill for good or is this just a temporary correction?

Since June 9, after hitting a peak share price above $300, GameStop stock  (GME) - Get GameStop Corp. Class A Report has been plummeting week after week: a decline of more than 30% in less than a month. Could this be the end of meme mania for GameStop, or just a pause before the stock heads to the moon again?

Figure 1: GameStop store.

Figure 1: GameStop store.

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Short squeeze still on the table

Business fundamentals were the initial reason behind short interest in GME having shot through the roof in 2020. The company seemed to have a business model that was rendered obsolete by e-commerce and the “death of the mall” phenomenon in the US.

With the pandemic severely disrupting brick-and-mortar retail, short interest in GME reached an astronomical 140%. Such levels of bearishness caused a massive short squeeze in January of this year, as soon as the stock began to inch higher.

Many (if not most) of the short sellers who still hold their positions today are likely to be the same who racked up losses after GME spiked early in 2021, but who managed to sidestep margin calls. With meme mania far from over, the risk of another short squeeze on the back of 25% short float remains high.

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What it will take

For GME to reach new peaks, community cooperation and resilience to hold shares even during downturns will probably be a key factor. Much less important will be the company's fundamentals and broad market movements, as both seem to have little impact on GME's performance in the short term.

Bullish sentiment has been quite strong on Reddit, as GME ranks among the top 3 most talked about stocks. GME's performance has been very much aligned with the ticker's popularity online. Last month, following the peak, the rally fazed as the stock's popularity on the web dropped (see below).

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For now, it remains to be seen whether the apes will remain loyal “hodlers” and fight the urge to lock in early-year profits or to limit their recent losses.

(Read more from Wall Street Memes: AMC Stock: Shorts Are Playing With Fire)

Twitter speaks

GME has been trading much lower since the last peak of June 9. In your opinion, what will make the stock reach new peaks again?

(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 Wall Street Memes)