“Create your 15 seconds of fame!” the homepage for Grom Social Enterprises (NASDAQ:GROM) invites its young users. The platform allows visitors to create content, discover content created by others and connect with friends, among other things. Today has certainly been an interesting day for GROM stock, which has skyrocketed after an uneventful morning, granting the company its own period of fame that’s lasted longer than 15 seconds.
What Happened With GROM Stock?
GROM stock began the day in a flatlining pattern, hovering close to $1.75 per share until high noon when it started to rise. Before 2 p.m., it had spiked by more than 216%, an astonishing figure given last week’s flatlining patterns in which it failed to rise above $2. It’s declined a bit since then, but GROM stock is still up more than 90% for the day as of this writing.
Throughout the industry, volatility has been the word of the day. Fellow social platform Paltalk (NASDAQ:PALT) rose by as much as 177% today though its currently only up by 53%. Paltalk peer DatChat (NASDAQ:DATS) was up by more than 22% earlier but has since fallen sharply. It is currently down more than 11% for the day. Let’s not forget that last week saw some noticeable gains for PALT stock as well.
Yala Group (NYSE:YALA), a fellow social media and content creation platform began to rise around the same time as GROM stock and despite some declines, is currently up almost 3% since this morning.
What It Means
These patterns throughout a specific sector suggest a clear sympathy play, which occurs when a stock moves in relation to the movements of its competitors. PALT and DATS were displaying highly similar patterns until the latter’s midday decline.
Yala moved in a similar pattern to GROM stock, the company to which it is most similar in terms of features and target market, though its gains were nowhere near as significant.
These sympathy patterns can seem random but they are worth paying attention to when they appear, particularly because they are often quick to capture the attention of social media communities. When this happens, the stock prices can rise even further. However, as we’ve seen today, quick gains can often lead directly to quick losses.
Why It Matters
Sympathy patterns aside, it’s worth noting that this is an opportune time for a company like Grom to be establishing itself in the communication platform market. Facebook (NASDAQ:FB) recently announced plans to pause its Instagram Kids platform, an initiative that would have delighted young users across the globe. These kids want their own space online, particularly one with TikTok-like features.
Grom has recognized this demand, and the way it looks from here, they are working hard to supply a product for it. If this continues, GROM stock will have plenty of room to grow and achieve the type of sustainable success that isn’t generated by sympathy plays.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.