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Why GameStop and Other Meme Stocks Soared This Week

By Howard Smith – Aug 27, 2021 at 3:53PM

Key Points

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It felt like old times as GameStop soared almost 30% in a single day.

What happened

In true meme stock fashion, shares of GameStop (GME -1.82%) soared this week with no company news. The biggest gains came Tuesday when the stock jumped 27.5%, and other Reddit favorites joined the party. As of Friday midafternoon, GameStop shares were up 28.4% for the week, and fellow meme stocks BlackBerry (BB -2.12%) and Celsius Holdings (CELH -0.97%) were 18% and 15% higher, respectively. 

So what

GameStop will next report its financial results on Sept. 8. Besides the fact that there was no fundamental news from these names this week, there's another reason the surge in share prices is curious. 

bar chart with rising bars and rocket ships showing stocks blasting higher.

Image source: Getty Images.

Now what

One of the main original drivers of the retail trading frenzy in these names was the aim to drive short squeezes. Meme stocks by definition have a relatively high amount of short interest. While GameStop, BlackBerry, and fitness drink maker Celsius Holdings still have short interest, the levels have decreased materially in just the last three months. 

GME Percent of Shares Outstanding Short Chart

GME Percent of Shares Outstanding Short data by YCharts

With about 10% of shares still sold short, and based on the lack of news this week, we may find that this week's GameStop trades were related to further short covering. 

Celsius Holdings reported continued strong sales growth earlier this month, and some of its stock strength is most certainly related to those fundamentals. And BlackBerry's IVY cloud-connected software platform may be an important growth driver for the company. BlackBerry announced IVY will provide a secure, vehicle-based payment capability that it believes will "create new opportunities for automakers to offer a vast array of payment services and develop previously untapped revenue streams."

It remains to be seen if BlackBerry can gain momentum with automakers from its offering. But it is something to follow, and Celsius has proven its business is in growth mode. BlackBerry and GameStop are still reporting losses, though, and Celsius has a market cap of over $5.6 billion with net income of just $4 million in its most recent quarter. 

As has been the case since the retail trader movement began earlier in the year, the moves still aren't following results from the underlying business. Investors will be watching to see if the next update from GameStop will provide any new surprises indicating whether a business turnaround can begin to justify the share price. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Celsius Holdings, Inc. The Motley Fool recommends BlackBerry. The Motley Fool has a disclosure policy.

Stocks Mentioned

GameStop Stock Quote
$27.02 (-1.82%) $0.50
BlackBerry Stock Quote
$5.09 (-2.12%) $0.11
Celsius Stock Quote
$116.44 (-0.97%) $-1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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