What do Elon Musk, Chamath Palihapitiya and an “army” of Redditors have in common? They share varying levels of responsibility for a meteoric rise in GameStop (NYSE:GME). In fact, after closing Tuesday out 92.7% higher, GME stock is up another 50% this morning.
So where do things stand? Yesterday brought another wave of fascination and criticism for r/WallStreetBets, the subreddit taking GME stock to the moon. At the same time, it brought a handful of victories and pushed GameStop above $200 in pre-market trading.
Chamath Palihapitiya, the special purpose acquisition company icon behind Social Capital, entered the ring. Taking advice from his social media followers, he purchased February call options on GameStop with a $115 strike price. Knowing that an iconic investor was joining the Reddit cult also spurred on the GameStop excitement. It also helped when short-seller Melvin Capital, a named enemy on r/WallStreetBets, closed out its position. It is not clear just how much the firm lost, but Citadel and Point72 have infused $3 billion to help stabilize its finances.
With these victories in the rear-view mirror, where do GameStop and GME stock go next? Remember, although there is an interest in the turnaround narrative, there is also just a lot of hype and speculation. While some investors are waiting Chewy founder Ryan Cohen (NYSE:CHWY) to turn GameStop into an e-commerce powerhouse, others are looking to social media for signs.
One of those signs came from Tesla (NASDAQ:TSLA) CEO Elon Musk. He tweeted “Gamestonk!!” on Tuesday, including a link to r/WallStreetBets. Although it is never entirely clear what the CEO means, his followers are taking it as a good sign. Replies included people betting it would hit $200 on Wednesday and Morning Brew’s “GME +69,420% in after hours trading.”
Why Redditors Think GME Stock Is Headed to $5,000
Although r/WallStreetBets and its GME stock cult are not immune to criticism, the group of Redditors seems to have won the battles against Melvin and Citron Research. Adding fuel to the fire, major names like Musk and Palihapitiya are throwing legitimacy to GameStop. And while investors are now scrambling to find the next Reddit stocks, the cult of GameStop is not ready to give up.
In fact, some posters are throwing out price targets of $500, $1,000, $2,000 and even $5,000. Why? With firms like Melvin scrambling to close out their short positions, Redditors believe other big-name short-sellers will follow. And as they try to cover their positions, the powerful price action we have seen in GME stock will only continue.
So what should you know here? And how should you consider these moonshot targets? Take everything with a grain of salt. These bullish posts self-identify as a sort of fiction, including caveats that they are not real investment advice. However, as if this writing, a “GME Endgame” post is the top post on all of Reddit with 4,000 comments and more than 41,000 upvotes.
The opportunity and the risks here are clear, and investors should tread extremely carefully. If you are not sure what to do, start with this roundup from InvestorPlace analyst Luke Lango. He has picked five stocks that could be the next Reddit targets and start to rocket higher.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.