It has been an interesting week for Keith Gill, also known as Roaring Kitty on social media. The man credited with igniting the GameStop (NYSE:GME) short squeeze of 2021 picked this May to return to X (formerly Twitter) and other social media platforms after a multi-year hiatus.
Recently, Gill revealed a significant position in GME stock, igniting some momentum for the struggling retail favorite. Even more recently, however, an account associated with Gill scheduled a livestream for today, June 7 at 12:00 p.m. Eastern on YouTube. This news sent GameStop up yesterday as retail investors became hopeful about another short squeeze on the way. But these hopes may have been premature. Indeed, the video game retailer unexpectedly released first-quarter earnings this morning — and the results weren’t great.
GME Stock After Earnings
If GameStop hadn’t released its Q1 report this morning, shares would likely still be riding high on momentum for the Roaring Kitty livestream. But just as quickly as it rose, GME stock began to fall when the company revealed some concerning elements.
As of this writing, GME is down about 20%, an unsurprising decline given the company’s Q1 sales results. CNBC reports:
“The company on Friday posted net sales of $881.8 million for the period, down 29% from $1.237 billion a year prior. The sales decline was steeper than the two Wall Street analysts who cover the stock expected. Their estimates were in a range of $900 million to $1.09 billion per FactSet.”
That’s not the only factor negatively impacting GME stock, however. The company also announced a plan to unload “up to 75 million shares onto investors.” As Fortune reports, this compromises Gill’s alleged plan to celebrate becoming a “GameStop billionaire” in real time — supposedly the reason for his upcoming livestream.
GME stock is still trending downward today and, based on its current trajectory, a rebound isn’t likely. Data from ApeWisdom shows that interest in GME has been surging across r/WallStreetBets and other social media channels over the past 24 hours. So far, though, it doesn’t appear to be helping.
A Lesson for Investors
As GME falls, investors should evaluate today’s events in context and consider a key lesson about betting on meme stocks. Yes, influencers like Gill have the ability to generate hype that can push a stock up in the short term. But a company’s fundamentals are more important. That’s something that GME stock is proving today.
If fundamentals weren’t so important, GameStop would be rising in spite of the sales decline and new stock news. But shares are tanking and, so far, fellow meme stocks like AMC Entertainment (NYSE:AMC) and Koss (NASDAQ:KOSS) are doing the same. At their core, the biggest thing these struggling names have going for them is their retail investor following.
One TipRanks contributor recently advised investors to approach AMC stock with caution, stating that the meme stock trading frenzy was “just not enough.” We now know that even the return of someone like Roaring Kitty isn’t enough to boost a losing meme stock when the company has revealed a steep sales decline.
On the date of publication, Samuel O’Brient did not hold (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.
