GameStop leads 'meme stocks' higher, snaps seven-day losing streak

Shares of GameStop Corp rose 18% on Wednesday, snapping a seven-day losing streak to post their biggest one-day increase since March 25.

The video game retailer’s shares closed at $166.53 with trading volume that was more than twice the stock’s 10-day moving average. Other so-called meme stocks - shares favored by the denizens of online communities such as Reddit’s WallStreetBets - were also volatile on Wednesday.

Some supporters of the stock pointed to a late-Tuesday announcement that the company was voluntarily paying back $216 million in debt early as a catalyst for the gains.

The company’s shares rose in aftermarket trade on Tuesday following the announcement. Price gains and trading volume accelerated late Wednesday morning.

Reddit users “are rightfully optimistic about the debt repayment,” said Wedbush Securities analyst Michael Pachter. “Without debt and with the likelihood of profitability this year, bankruptcy risk is all but eliminated.”

“That said, the stock is still trading well above what I think it’s worth,” said Pachter.

Wedbush has a “Sell” rating on the stock and a price target of $29, compared to a median Wall Street price target of $25 for GameStop, according to the latest data from Refinitiv.

A regulatory filing on Wednesday showed that GameStop Chief Executive Officer George Sherman has forfeited more than 587,000 shares as he failed to meet a performance target.

Reuters reported late on Monday that GameStop is looking for a new chief executive to replace Sherman as it pivots from being a brick-and-mortar video game retailer to e-commerce. GameStop shares lost nearly 11% of their value that day.

GameStop’s shares soared more than 1600% in January as a flurry of buying forced bearish investors to unwind their bets against the stock, an event known as a short squeeze. The stock has pared those gains but is still up more than 780% this year.

Some WallStreetBets users cheered Wednesday’s rally.

“GME paying off the debt eliminates the bear thesis. Such a nice play,” wrote Reddit-user FelixSV.

Other stocks popular on Reddit were also volatile on Wednesday, with shares in headphone-maker Koss Corp closing up a penny at $19.41 after rising as high as $21.90 during the session.

Shares in cinema operator AMC Entertainment closed up 5.8% at $9.35 after rising as high as $9.81 during the session.