As Meme Stock Mania Fizzles, Wall Street Sees “Big Reckoning”

Photographer: Tiffany Hagler-Geard / Bloomberg

The crowd of Reddit day trading has turned the first quarter of 2021 into one of the wildest periods of stock market rage in modern history. The books – plural – will undoubtedly be dedicated to the subject in the coming years.

But after these small speculators, they teamed up to pick up dozens of obscure stocks with hundreds or even thousands of percent – and, in the process, they burned a few barons of hedge funds that bet on declines – the movement seems to be deteriorating. An index that tracks 37 of the most popular meme stocks – 37 of the 50 that Robinhood Markets has banned customers from trading during the peak of the frenzy – is essentially unchanged in the past two months, after rising by almost 150% in January.

Talk to Wall Street veterans and they will tell you that this flat liner is the beginning of what will be an inexorable downward movement in these stocks.

These are not so much the fundamental weaknesses of companies. At least not in the short term. The zealots who trade the day have shown a surprising ability to ignore these facts. Moreover, as the pandemic slows slowly and the economy begins to open up, many of them will leave their homes and begin to return to offices, restaurants and embark on trips near and far. And, as they do, they may no longer be obsessed with their Robinhood accounts.

In other words, their collective influence on the meme-stock universe will diminish.

“People will do other things,” said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a “high estimate” at some point, he said. “I have no questions in my mind.”

Of course, the Wall Street set broadly misread the Reddit crowd weeks earlier this quarter, and their analysis may be wrong again now. However, preliminary data suggest that they are right.

Recent reports suggest that vaccinated Americans are planning long-awaited vacations with searches for “Google Flights ”reached a maximum popularity score of 100 this week, according to a Google Trends tracker. The opposite is seen for terms such as “stock trading ”and“investments ”have declined, according to Google Trends.

“The impact of stimulus testing on retail is declining,” said Edward Moya, a senior market analyst at Oanda. “Many Americans are looking to attend sporting events, travel around the country, vacation, visit family and friends, and renovate closets before going out to restaurants, pubs, and returning to the office.”

Read more: Americans signal that they will spend incentives for travel, not GameStop

Gamestop Juggernaut

Video game retailer GameStop Corp. has become the poster child for retailers who want to get upset against the elite hedging funds. However, stocks 2.460% roller coaster along with other favorites promoted on Reddit’s WallStreetBets thread caused both a lot of pain and joy.

The stock increase of over 900% this year has attracted the attention of Wall Street analysts following it. The 12-month average price target implies that the shares will lose more than three quarters of their value compared to current levels. Only Jefferies has a target price close to closing at $ 191.45 on Thursday, and the call came with a warning that the shares are “subject to volatility beyond the fundamentals.”

But any sense of GameStop trading on fundamentals has been ignored since it first captivated Wall Street and Reddit users in the latter half of January. The Bulls are more than happy to promote their bets on forums as a move to keep them short sellers, while buying a revival of the company delivered by activist investor Ryan Cohen.

Read more: GameStop adds another Amazon executive to the team

given Position of AMC Entertainment Holdings Inc. as a cinema that many Americans went to at one time, it’s no complete surprise why Reddit users rushed to the company’s assistant. #SaveAMC has evolved on Twitter, and amateur investors have seemed more than happy to fight skeptics on Wall Street, despite the fact that most cinemas have been shut down due to the ongoing pandemic.