GameStop (NYSE:GME) is surging higher. This GameStop stock rally is being driven by a famed meme trader Keith Gill, best known as “Roaring Kitty.” His recent social media posts caused a surge of over 81.5% before the market opened. A further surge is very possible.
Yet while those holding this stock can lock down some windfall profits, if you’ve yet to add GME to your portfolio, all we can say is, be careful. Take away the impact of “Roaring Kitty” from shares, and they’re hardly the cat’s meow.
GameStop Stock: Meme Mania is So Back
Until late April, it may have seemed as if the meme stock phenomenon was finally in the stock market graveyard.
GME and its fellow “meme kings” were trending lower, sinking down to prices more in line with their fundamentals and prospects.
Since May, however, it’s clearly become a meme trader’s market once again. As reported by Reuters and other major financial publications, the famed meme investor posted on his X.com (aka Twitter) account for the first time since 2021.
This sparked a mega rally for major meme plays across the board, most notably GameStop stock. Shares climbed to as much as $64.83, up by more than sixfold from their lows.
Alas, not too long after it started, this initial “Roaring Kitty rally” lost momentum. Soon after, GME and other meme stocks coughed back most of these gains.
However, with this latest development, “Roaring Kitty” is clearly not quite done flexing his clout. On June 3, Keith Gill revealed on Reddit (NYSE:RDDT) that he currently holds a position in GME worth around $115.7 million.
Heavy Bagholder Risk After this Run-Up
It may tempt you to hop aboard the GameStop stock bandwagon, in the hopes that this meme rally lasts at least as long as the last one. However, chances are if you’re reading this now, it’s far too late to dive into a position. Buy now, and you risk holding the bag.
There’s nothing wrong with Keith Gill being bullish on GME. However, taking another look at GameStop’s fundamentals, Gill’s bullishness is a mystery to us. Shares are very expensive, with a four-digit forward price-to-earnings ratio.
Yes, it’s perhaps not fair to value GME solely on its forward earnings multiple. After all, the company’s CEO and largest shareholder, Ryan Cohen, is still at work with his turnaround efforts.
However, as we pointed out last month, GameStop’s fiscal results are not improving much. Last quarter, revenue fell slightly, and net income increased slightly.
Meanwhile, the company itself seems to be capitalizing on these meme waves, by selling newly-issued shares of GME stock.
Although a positive for shoring up GameStop’s balance sheet, this capital raising is going to be dilutive for anyone buying in at current prices.
The Verdict: Time to Take Profit, Otherwise Avoid with a Capital A
Again, if you already own GME, pat yourself on the back. Whether you’ve held it since it fell back to single-digit prices, or you “bought the dip” last month, you’re sitting on massive unrealized gains.
Consider it high time to cash in those chips. Sell into strength while it lasts. Otherwise, the verdict here is pretty clear. If you hold no position in this stock, avoid it with a capital A.
This latest “Roaring Kitty rally” could send GameStop back to the mid-$60s per share before its all said-and-done, but it’s far too late to enter a position. Given the stock’s weak fundamentals, pretty soon shares could be back to $20, $15, maybe even below $10 per share.
GameStop stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.