(NewsNation) — GameStop may have started it, but companies like Krispy Kreme and Kohl’s are at the center of a new meme stock frenzy.
As the S&P 500 hits fresh records, individual investors are once again chasing unloved stocks, making YOLO bets and fueling the hype on social media.
Shares of doughnut maker Krispy Kreme were up as much as 70% on Tuesday with no clear catalyst, before pulling back the next day.
Krispy Kreme, GoPro and Beyond Meat surge as the latest meme stock revival rolls on
Kohl’s, which operates 1,600 stores nationwide, saw its stock price roughly double earlier in the week before falling back to earth. But as of midday Thursday, the stock remained up about 40% from Monday.
Shares of camera maker GoPro, plant-based meat company Beyond Meat and real estate platform Opendoor Technologies have also been swept up in the latest wave of speculative trading.
What’s driving the latest meme stock rally?
It’s not entirely clear what’s fueling the latest meme stocks, which Wall Street defines as stocks that gain significant popularity and trading volume primarily due to social media hype and online communities, rather than the company’s financial performance.
Like their predecessors, GameStop and AMC Entertainment, some of today’s meme stocks are heavily shorted — a sign that professional investors are betting on them to decline.
Video game retailer GameStop became the face of the meme stock movement in 2021, when retail traders sent shares soaring and triggered massive losses for a prominent hedge fund betting against it. That fund, Melvin Capital, later shut down.
S&P 500 hits new record high in remarkable turnaround
On r/wallstreetbets, a popular subreddit with over 19 million members, users have posted screenshots claiming to show trades involving the new meme stocks.
“DNUT = Most I ever made in 1 day,” a Reddit user wrote earlier this week.
“Printed some Kohl’s cash,” another wrote with a screenshot showing their purported profit.
The latest craze may also reflect the strength of the broader stock market, with retail investors more likely to take chances when times are good.
“I think more and more investors are feeling somewhat invulnerable right now,” Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance.
Should retail traders think twice about meme stocks?
Meme stock hype cycles are unpredictable and often short-lived, which can lead to sharp swings — and potentially major losses — for those who jump in.
Shares of Opendoor Technologies were trading for less than $1 just 10 days ago before skyrocketing to nearly $5 per share on Monday. By Wednesday, the stock had fallen to around $2.
The swift turnaround underscores the risks of chasing fast-rising stocks, which can leave investors wishing they hadn’t bought into the hype.
It took just four weeks in 2021 for GameStop’s stock to go from less than $5 to more than $120, but it hasn’t hit that price again. As of Wednesday, GameStop was trading around $24 per share.
Given today’s broader economic picture — elevated interest rates and a cooling job market — some think the latest meme stock rally may fade more quickly.
“Investors are lapping up all of the market goodies on offer and showing less concern for rising risk factors,” Mike Bailey, director of research at FBB Capital Partners, told Bloomberg.
Bailey said current market sentiment is “a journey toward irrational exuberance.”
The Associated Press contributed to this report.
