Are Meme Stocks Making a Comeback Like in 2021?

TL;DR

Meme stocks, including Kohl's and Opendoor, are experiencing a resurgence similar to the 2021 frenzy, driven by short squeezes and significant retail investor interest. Kohl's surged over 100% in a day, highlighting the influence of retail traders, who now account for over 20% of stock market trading volume. This spike reflects growing speculation and risk-taking among investors in the current market climate.

Transcript

Good Morning Brew Daily Show. I'm Neal Freyman. and I'm Toby Howell. Today, Randy Marsh can quit his day job because South Park just inked a $1.5 billion deal. Then bust out your cold cash because the door is opening again to meme stock madness. It's Wednesday, July 23rd. Let's ride. Must be a slow week at work because we've been crushed by your re... Read More

Key Insights

• Meme stocks like Kohl's and Opendoor are experiencing a resurgence due to short squeezes, reminiscent of the GameStop frenzy in 2021.
• Retail investors are a significant force in the stock market, making up 20.5% of trading volume, often focusing on low-value stocks.
• FINRA is considering lowering the day trading rule from $25,000 to $2,000, potentially increasing retail trading activity.
• Coca-Cola announced a new product using cane sugar, but will not replace its corn syrup formula, reflecting consumer preferences and political pressures.
• GM faces significant profit losses due to tariffs, impacting its ability to invest in new technologies despite a strong quarterly performance.
• Google's AI model achieved top scores at the International Math Olympiad, showcasing the potential of AI in complex problem-solving.
• South Park signed a $1.5 billion deal with Paramount, highlighting its enduring value and influence in the entertainment industry.
• Tesla's new diner concept in LA combines charging stations with dining, reflecting innovative retail approaches in the EV market.

Questions & Answers

Q: Are meme stocks back like they were in 2021?

The rallies in Kohl’s and Opendoor suggest meme-stock speculation is returning. The sheer number of traders involved, social-media attention, short squeezes, and support for unprofitable companies reminded the hosts of 2021, when GME and AMC were surging.

Q: What caused Kohl’s stock to surge?

Kohl’s rally was likely driven by a short squeeze rather than an improvement in its department-store business. Nearly half of its outstanding shares were sold short, so the sudden price increase pressured bearish traders to cover their positions.

Q: How much did Kohl’s stock rise?

Kohl’s more than doubled during premarket trading and peaked at $21 per share. That represented a 105% increase from the previous day, although the stock finished the day up around 37%.

Q: Why did Opendoor become a meme stock?

Opendoor attracted support from the social-media crowd despite having recently been close to delisting. The struggling real-estate technology company climbed as much as 121% at the start of the week amid conditions similar to the Kohl’s short squeeze.

Q: What is a short squeeze?

A short squeeze occurs when a heavily shorted stock suddenly rises and forces short sellers to cover their positions. That covering can add further pressure to the stock’s trading, as happened with Kohl’s and echoed the GameStop situation.

Q: How much trading activity did Kohl’s attract?

By 9:51 a.m. Eastern, 75 million Kohl’s shares had already traded. That was a daily record for the stock even though the trading day had barely begun.

Q: What role did WallStreetBets play in the Kohl’s rally?

Kohl’s was the most-commented ticker on the WallStreetBets subreddit during the previous 12 hours. The hosts considered that unusual because Tesla typically dominates discussion on the forum, showing the scale of attention Kohl’s received.

Q: Why might the meme-stock rally indicate market froth?

Speculative interest was flowing toward companies that were not generating profits while stocks continued reaching all-time highs against a fragile economic backdrop. Of the 14 Russell 3000 companies that had more than tripled since the April 8 market bottom, ten did not generate profits.

Summary & Key Takeaways

• Meme stocks like Kohl's and Opendoor are seeing a revival, driven by short squeezes and retail investor interest, echoing the 2021 stock market frenzy.

• Coca-Cola and GM face challenges with changing consumer demands and tariffs, impacting their strategies and financial performances.

• Google's AI achieved top scores at a prestigious math competition, while South Park secured a major streaming deal, showing the influence of technology and media.