The
return
of
“Roaring
Kitty”
sparked
a
jaw-dropping
advance
in
GameStop
shares
Monday,
but
such
a
speculative
rally
in
an
unprofitable
company
will
likely
end
badly
once
again.
Roaring
Kitty,
the
man
who
inspired
the
meme
stock
mania
of
2021,
resurfaced
online
with
a
cryptic
image
showing
a
man
in
a
chair
leaning
forward.
That
was
enough
to
spark
a
buying
frenzy
among
amateur
traders.
Shares
of
GameStop
surged
as
much
as
110%
higher
with
a
slew
of
trading
halts
for
volatility.
However,
from
a
fundamental
standpoint,
the
brick-and-mortar
video
game
company
isn’t
deserving
of
such
a
pop
in
the
stock
price.
In
late
March,
GameStop
said
it
cut
an
unspecified
number
of
jobs
to
reduce
costs
and
reported
lower
fourth-quarter
revenue
amid
rising
competition
from
e-commerce-based
competitors.
“I
don’t
know
of
anything
fundamental
that
would
drive
the
stock
this
high,”
Michael
Pachter,
Wedbush
analyst
covering
GameStop,
told
CNBC.
“They
are
not
in
a
position
to
be
profitable.”
“They
made
$6
million
last
year
and
burned
cash,”
Pachter
said.
“We
expect
them
to
lose
$100
million
a
year
going
forward. It’s
a
race
to
see
if
they
can
close
stores
fast
enough
to
limit
losses,
but
they
have
no
plan
that
would
suggest
they
can
grow
revenues
or
profits,
and
their
core
business
is
in
decline.”
GME
5D
mountain
GameStop
Pachter
has
a
underperform
rating
on
GameStop
and
a
$5.60
price
target.
At
Monday’s
peak,
GameStop
hit
$38.20.
During
2021’s
mania,
GameStop
shares
hit
an
all-time
high
of
$120.75
intraday,
adjusted
for
a
subsequent
4-for-1
stock
split
in
the
summer
of
2022.
But
as
interest
from
individual
investors
eventually
faded,
the
stock
collapsed
along
with
other
meme
names.
GameStop
hit
a
three-year
low
of
$9.95
last
month.
The
revival
of
the
meme
stock
craze
is
happening
at
a
relatively
quiet
time
for
the
broader
market,
with
the
first-quarter
earnings
season
winding
down
and
the
next
Federal
Reserve
policy
meeting
about
a
month
away.
The
Cboe
Volatility
Index
,
known
as
the
VIX
or
Wall
Street’s
fear
gauge,
shot
above
20
last
month
but
it’s
been
trading
around
13
as
of
late.
Jeff
deGraaf,
chairman
and
CEO
of Renaissance
Macro
Research,
said
while
he’s
not
at
all
involved
in
the
GameStop
trade,
he
could
be
looking
to
take
advantage
of
the
wild
swings
in
meme
stocks.
“We
don’t
traffic
in
that
stuff,
but
as
a
rule,
we
are
sellers
of
overbought
downtrends. That’s
all
GME
is
to
us,”
deGraaf
told
CNBC.
Still,
the
surge
in
the
animal
spirits could
spell
trouble
for
the
broader
market
that
is
already
fragile
to
the
shifting
expectations
for
the
direction
of
interest
rates.
“If
this
is
still
the
type
of
market
we
are
in,
perhaps
Jerome
Powell
should raise interest
rates
to
the
moon,” Bernstein analyst Mark
Schilsky
said
in
a
note
to
clients.
