The short squeeze hype surrounding Redbox (NASDAQ:RDBX) may have been short-lived. The company, known for its DVD rental kiosks, enjoyed a rally yesterday as high short interest pushed RDBX stock up. But as quickly as shares rose, they began to fall again. Now that Monday’s rally has cooled, RDBX is back to trading at its normal levels — which are not very high.
What’s Happening With RDBX Stock
Yesterday, as bearish energy engulfed Wall Street, RDBX stock rose steadily through the chaos. Shares spiked more than 30% as high short interest collided with the heavy trading volume generated by retail investor activity. But as InvestorPlace writer William White noted, when a company joins the ranks of the meme stocks, it is subject to extreme volatility. And that is exactly what we are seeing from Redbox.
RDBX stock has been falling since markets opened today. While it has rallied slightly, it remains in the red by more than 35% as of this writing.
The Next Meme Stock to Watch?
Redbox’s recent activity is completely in keeping with that of previous meme stocks such as Gamestop (NYSE:GME) and AMC Entertainment (NYSE:AMC). High trading from retail investors pushes them up with no warning, but short interest is never far away.
A recent analysis from Seeking Alpha reveals two things. First, comments on Reddit’s r/WallStreetBets surged 400% in the past 24 hours and that by the end of May. Second, short interest in RDBX stock had reached 37.58%. On May 31, Redbox topped short research platform Fintel’s list of stocks that presented the best short-squeeze opportunities.
Redbox has been in the news for positive reasons lately. Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) recently announced plans to acquire it for $375 million. Additionally, Apollo Management, Standard General and Vanguard Group all maintain large positions in RDBX. As InvestorPlace contributor David Moadel recently reminded investors, though, “The company is going through major changes now, so RDBX stock is only appropriate for traders who can handle the risks involved.”
Even so, it is clear the momentum that pushed Redbox up yesterday has subsided. In 24 hours, RDBX stock has gone from ranking sixth on r/WallStreetBets’ most-discussed stocks to 21st. While both “short” and “squeeze” are popular keywords, both overall mentions and mentions on the meme stock forum have been decreasing steadily. It remains the most discussed stock on the r/Shortsqueeze forum, but mentions have fallen 19% since yesterday.
What It Means for RDBX Stock
Redbox’s recent rise and fall should remind investors of how volatile meme stocks are. High short interest can make them tempting plays, but that doesn’t mean the companies have any actual utility. Even being acquired by a prominent media producer hasn’t helped Redbox achieve the type of sustainable growth investors want to see. And if that type of catalyst can’t boost shares, it’s hard to be optimistic about a company’s growth potential.
Investors can expect to hear Redbox discussed frequently as contrarian investors continue their quests to push their favorite stocks higher. But anyone concerned with actual value investing and building a growth portfolio should still stay away.
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.