Why is AMC stock soaring? Is this a new GameStop situation? Is it a good idea to buy?
A cartoon posted on the social media platform X sent GameStop shares soaring on Monday reigniting interest in other meme stocks like AMC as well.
GameStop saw its share value skyrocket on Monday after one of the driving forces behind the meme stock frenzy of 2021 posted a cartoon on X. It was the first activity on Keith Gill’s account, under the handle Roaring Kitty on the social media platform formerly known as Twitter, in nearly three years.
He along with an army of amateur retail investors banded together in Reddit groups such as WallStreetBets in 2021 to make investments counter to those of big Wall Street names. That helped drive the share price through the roof of companies which were targeted for “shorting” from traditional big players. In turn, that created a momentary financial lifeline for the beleaguered companies while at the same time caused billions in loses for the shorters.
So, is this the start of a new meme stock frenzy? Financial planners warn that retail investors should be wary and do their research before jumping in.
Why is AMC stock soaring? Is this a new GameStop situation? Is it a good idea to buy?
The cryptic image posted by Roaring Kitty on X, and received more than 18 million views, was of a man who is holding onto a game controller with a red arrow to indicate that he is leaning forward. The meme is supposed to mean that things are starting to get “serious.”
And so they did for GameStop shares, trading of which was paused on Monday multiple times due to volatility. The stock finished the day up over 74% higher but had spiked more than 110% earlier in the day.
AMC shares, which have been on a downward trend since peaking in 2021, also got wind in their sails climbing $2.28, or 78%, to finish the day trading at $5.19 apiece. That’s still lower than before when the meme stock frenzy got into full swing. Back in early 2021, the stock price shot up to over $230, a level not even Gill thinks will be seen again.
The volatility that comes with meme stock investing should give any amateur investor pause before diving in. Douglas Boneparth, a certified financial planner and the president of Bone Fide Wealth told CNBC Make It that it’s important investors contemplate their motivations behind investing in meme stocks.
“Is [fear of missing out] leading the way or is this legitimately a great opportunity to jump in?” he says. “At the end of the day, you’ve got to look at the business itself.” That means researching the company’s core business and how it plans to make revenue over the long term.
He gives GameStop credit for using the windfall from the trading frenzy in 2021. “They really used their previous opportunity as a way to kind of turn the company around, take it from a struggling business to one that’s doing a lot better,” Boneparth explained.