The GameStop Corp. (NYSE: GME) share price fell 2.4% yesterday (overnight Aussie time).
While the ASX was shuttered for the long Easter weekend, US stock exchanges remained open. GameStop closed the day at US$186.95 per share. That gives the video game retailer a market cap of US$13.1billion.
Despite some recent selling action, GameStop shares are still up an eye-popping 984% so far in 2021.
What drove GameStop’s meteoric rise?
As you most likely know, GameStop has the so-called Reddit army to thank for its skyrocketing shares. That’s the loosely connected group of retail investors employing social media apps like WallStreetBets to synchronise their investment plans.
Not that every Reddit army recruit has banked those kinds of gains. Anyone who bought GameStop shares at the 27 January highs is currently nursing a 46% loss on their investment.
But that could be just the beginning of a longer, harder slide for GameStop and other ‘meme stocks’.
How COVID vaccines could torpedo the GameStop share price
GameStop and other so-called meme stocks are widely believed to have benefited from the global pandemic. That’s because the virus saw people forced to remain at home. This gave them extra time to explore the share market opportunities right when many found their bank accounts flush with government stimulus cheques even as they were unable to spend money on their normal pursuits.
But all that looks set to change. And the implications for shares like GameStop could be dire.
According to Bloomberg:
An index that tracks 37 of the most popular meme stocks – 37 of the 50 that Robinhood Markets banned clients from trading during the height of the frenzy – is essentially unchanged over the past two months after soaring nearly 150% in January.
As vaccines begin to take the teeth out of the coronavirus and the world reopens, this trend could well accelerate as people turn away from their day trading apps and towards the activities and work places they were accustomed to.
Edward Moya is a senior market analyst at Oanda. According to Moya:
The stimulus check impact on retail trading is waning. Many Americans are looking to go big on attending sporting events, traveling across the country, vacationing, visiting family and friends, and revamping wardrobes before going out to restaurants, pubs and returning to the office.
While Moya’s forecast could prove bad news for the share price of meme stocks like GameStop, it could open new opportunities in areas like ASX travel and retail shares.
Happy investing.
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More reading
- GameStop appoints former Amazon and Chewy Execs in turnaround bid
- Here are the US shares ASX investors have been buying
- Airtasker (ASX:ART) share price insanity: Is this the ASX’s GameStop?
- ASX investors still can’t get enough of GameStop (NYSE:GME) shares
- Is the cashed up Reddit army forming for a new charge?
Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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