Meme stocks are those that gain popularity and trading volume that's mainly driven by social-media hype and online communities over the company’s financial performance.Richard Drew/The Associated Press
As the stock market pushes into record territory and some companies trade at lofty levels, investors are once again looking for bargains among some of Wall Street’s beaten down companies.
The latest so-called meme stocks include doughnut maker Krispy Kreme Inc. DNUT-Q, camera maker GoPro Inc. GPRO-Q and plant-based meat maker Beyond Meat Inc. BYND-Q. Each company is surging Wednesday. The gains follow sharp jumps recently for department store Kohl’s and the online-based real estate company Opendoor Technologies. The companies have been mostly struggling to notch profits.
The trio have stepped in for department store Kohl’s Corp. KSS-N and the online-based real estate company Opendoor Technologies Inc. OPEN-Q, which are falling sharply Wednesday after surging over a number of days. It’s a sign of how quickly the hot meme stocks can fall out of favour.
“While this activity reflects rising risk appetite, it remains isolated and has yet to challenge the broader market’s calm and steady tone,” said Mark Hackett, chief market strategist at Nationwide.
Wall Street defines a meme stock as a stock that gains significant popularity and trading volume, primarily driven by social media hype and online communities, rather than the company’s fundamental financial performance. Think GameStop Corp. GME-N and Blackberry Ltd. BB-T in 2021, and a few subsequent instances.
Kohl’s shares surge in value as retail investors breathe life into new meme stocks
Often, meme stocks are initially the target of “short sellers,” or investors betting against the stock. If other investors start buying the shares and boost the price, that could prompt the people betting against the stock to buy more shares to cushion their own losses.
Krispy Kreme initially surged early Wednesday but finished just 4.6 per cent higher, adding to its 26.7-per-cent gain a day earlier. The company has seen several years of falling profits and revenue. Wall Street expects it to post a loss for 2025. During its last earnings update, the company pulled its financial forecast for the year as it reassesses its partnership with McDonald’s.
GoPro jumped 12.4 per cent on Wednesday to follow its 41-per-cent gain on Tuesday. The company last posted an annual profit in 2022 and revenue has been sliding for several years as it faces more competition in a market for smartphone cameras that it once dominated. Wall Street is forecasting that the company will eke out a slight profit in 2025.
Beyond Meat initially jumped Wednesday, but closed just 1.4 per cent higher and is now up more than 20 per cent for the week. The company has been struggling for years and has yet to notch an annual profit since going public in 2019. The company warned in its latest earnings update that it is “experiencing an elevated level of uncertainty” and it pulled its financial forecasts for 2025.
Investors who buy now are betting that the momentum will continue, but it can shift suddenly.
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Kohl’s, which operates 1,600 stores across the country, reversed course Wednesday and slipped about 14.2 per cent following gains a day earlier. It is still up 28.4 per cent this week. It is wrestling with a number of challenges including a revolving door of CEOs and weak sales.
Opendoor Technologies shares also faded, falling 20.5 per cent to give back nearly all of this week’s gains. The stock nearly tripled last week. The stock’s recent gains came as hedge fund manager Eric Jackson touted the stock on X. Opendoor faces a tough housing market, with soaring interest rates and a low supply of homes making purchases and sales difficult for both homebuyers and homeowners.
The original meme stock is video game retailer GameStop. In 2021, the company was struggling to survive amid the switch from discs to digital downloads and major investors were betting against the company. Investor Keith Gill, better known as “Roaring Kitty,” rallied other investors to join him in buying up thousands of GameStop shares, changing the trajectory of the stock.
GameStop had been trading under US$5 heading into 2021. The stock is trading around US$24.20 on Wednesday.
The initial meme stock craze eventually fizzled out. But the frenzy occasionally reignites, as seen the past few years with sudden gains for BlackBerry, Bed, Bath & Beyond, and Chewy.
It took just four weeks in 2021 for GameStop’s stock to go from less than US$5 to more than US$120. But it has yet to touch that price again. Blackberry quickly jumped from less than US$7 to nearly US$30 in early 2021, but the gains were shaky and trimmed back within a year. It is now trading at about US$4.