Daily Brief - Back to the Frenzy

TLDR: Yesterday, meme stocks GameStop and AMC took investors on a wild ride reminiscent of 2021's trading mania, thanks to a social media nudge from "Roaring Kitty," a key figure in the previous market frenzy.

GameStop's stock shot up an eye-watering 75% after briefly doubling during the day, leading to multiple trading halts due to extreme volatility. AMC wasn't far behind, with its stock price swelling by 78%, again nearly doubling at its peak.

The catalyst? A simple post on X by Roaring Kitty, featuring a gamer intensely focused on the screen, his first in three years, which amassed 63,000 likes in just 13 hours.

For many investors, the dramatic surge in GameStop and AMC shares was a flashback to the meme stock frenzy of 2021, a period marked by global lockdowns and at-home trading. Before Monday's rally, GameStop had already been on the rebound, with its shares climbing 57% for the month, reflecting a renewed interest even before the latest social media-induced spike.

Despite this surge, the underlying fundamentals of GameStop tell a less exhilarating story. The company recently announced job cuts and a drop in fourth-quarter revenue to $1.79 billion from $2.23 billion the previous year, signaling ongoing struggles against e-commerce competitors.

Scenario Spotlight: What next?

The chart above displays the median 2-week response from GME stock, based on data from the past 2 instances where the stock rose 75% in 1 day.

Market Movers: Historical impact on other meme stocks

Earnings Spotlight: Alibaba earnings are here!

Alibaba's fiscal fourth quarter results showed a dramatic 86% decline in net profit to 3.3 billion Chinese yuan, primarily due to losses from investments in publicly traded companies.

Despite this, revenue rose to 221.9 billion yuan, exceeding expectations. The Taobao and Tmall division reported a 4% growth, and international commerce revenues surged by 45%. However, the profit drop significantly impacted Alibaba's stock, which fell about 5% in U.S. premarket trading.