I have historically been very bearish on GameStop (NYSE:GME), mainly due to key fundamental factors. The company continues to see revenue deterioration and the ultimate impact of online competition should render its business model obsolete over the very long term. That is why there is so much short interest in this name.
However, GME stock has been skyrocketing in recent days, surging more than 45% yesterday alone.
This recent surge is thanks to Keith Gill, also known as Roaring Kitty on YouTube and DeepF——Value on Reddit. Today brings yet another key Roaring Kitty catalyst, and GME stock fans should be watching closely.
The Spike Up
GameStop shares surged 21% on Monday following a Reddit post by Gill. The post displayed a screenshot suggesting a $175 million investment in GameStop. Initially, the stock rose 75% at the market open before retracing gains to close at $28.
A post showed 5 million GameStop shares bought at an average price of $21.274, valued at $115.7 million as of Friday’s $23.14 closing price. According to the screenshot on Reddit, the account also held 120,000 options expiring June 21, worth $65.7 million based on Friday’s close.
The rally has since continued, with GME stock surging more than 45% yesterday on news that Roaring Kitty will be going live on YouTube today. This will certainly be a big catalyst that is likely to move the stock in a big way.
All eyes will be on this stream as investors wait to hear what Gill has to say about GME.
GME Stock Is Seeing Incredible Hype
While current holders may profit from this week’s volatile moves, new investors should be cautious. Without Roaring Kitty’s influence, the stock’s appeal diminishes.
Until late April, the meme stock phenomenon seemed dormant as GME and its peers trended lower, aligning with their fundamentals. However, in May, Gill posted on X.com for the first time since 2021, sparking a significant rally in GameStop.
It’s my view that this recent volatility could either turn into a short squeeze or be tamped down by regulators and other parties looking to limit the likelihood of another big move in the stock. Gill is already facing a probe by Massachusetts regulators for trading in GME. We’ll have to see how this all plays out, but there’s an incredible amount of risk in either direction.
Avoid GameStop Stock at All Cost
At this point in time, GME stock is likely too risky to either go long or short. This is a stock that is seeing its implied volatility surge by the day with expectations that a short squeeze could take hold.
I have no idea whether or not this stock will squeeze higher from here. But most investors stand to lose on either side of the trade given how options are priced and how high the borrow fee (7.56% at the time of writing) is on this name.
I’m going to happily watch the madness from the sidelines and I suggest most investors do the same. For investors tuning in at 12 p.m. EST for the livestream, good luck!
On the date of publication, Chris MacDonald 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.
