GameStop (NYSE:GME) seems to be keeping its meme stock status standing. Indeed, with Keith Gill’s influence, this stock has seen incredible surges in recent years. However, investors now appear to be proceeding with caution regarding GameStop stock right now.

Gill’s return led to renewed retail interest, but the lack of positive news caused a sharp sell-off in GameStop stock. Many questions remain about the stock’s future direction. GameStop stock is likely to continue falling. Let’s dive into why that may be the case.

Volatility and GameStop Stock

GameStop’s stock rose nearly 8% over the past week to about $26 per share at the time of writing, outperforming the Nasdaq’s 0.43% gain. This increase came despite meme influencer Roaring Kitty, known for driving the 2021 meme stock surge, remaining absent from the spotlight.

Gill returned online in May after a three-year hiatus, boosting GME stock with tweets and a June livestream. He increased his holdings to 9 million shares, worth $233 million, and recently tweeted a cartoon dog, impacting Chewy’s (NYSE:CHWY) stock.

With Gill quiet for nearly a month, GameStop’s latest price rise followed its new collectibles initiative, marking a shift from traditional video game retail.

GameStop announced a $25,000 reward for the rare black parallel Lionel Messi sticker from the 2024 Panini Copa America collection. The sticker must have a PSA grade of 6 or higher, and the promotion runs until the end of 2024.

This initiative supports GameStop’s strategy to expand beyond video games and capitalize on Messi’s popularity after his move to Inter Miami.

That said, the question is whether such initiatives will be enough to promote continued share price growth moving forward. There are plenty of skeptics out there who are rightly concerned.

Roaring Kitty Poses Mystery

Gill gained fame in 2021, leading retail investors to propel GameStop’s stock to new heights. By April 2021, his holdings exceeded $34 million, as shown in a WallStreetBets post.

It’s uncertain if he sold those shares, but selling at the peak could have netted him over $60 million, which raises questions about his recent investments. Plenty of questions have abounded as to where Gill got the money to increase his bets on GameStop so dramatically.

Gill’s recently trading drew the Massachusetts Securities Division’s scrutiny, leading to an investigation for possible stock manipulation. Additionally, E*Trade contemplated closing his account over concerns. As of June 2, his portfolio indicated nearly $211 million in GameStop, requiring a 250% payout increase since his last sale three years earlier.

Gill disclosed owning 6.6% of Chewy’s stock worth over $240 million as of July, raising questions about how he financed this transaction. While he could have sold GameStop shares, he hadn’t updated his Reddit followers on his holdings.

If Gill has moved on to other meme stocks entirely, the bull thesis behind GameStop may not be as solid as many “apes” investing in this stock may think.

GME Stock Looks Risky Here

For long-term investors, speculative assets such as meme stocks or short squeeze candidates don’t usually fit the bill as appropriate investments. These stocks tend to be highly volatile, and that’s certainly the case for GameStop. Outside of speculative demand, there are few growth drivers here that justify the sort of valuation the company currently trades at, never mind where some bulls think the stock could be headed.

It’s my view that GameStop and other highly volatile plays are best avoided right now, from both sides of the trade. Shorting or going long (either directly or via options) is a risky strategy. And with so much volatility already priced into this stock’s borrow rate and implied options volatility, there’s not much to gain from betting on this stock. That’s my two cents.

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.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.