The return of “Growling Kitten” sparked a stunning rally in GameStop shares on Monday, but such a speculative rally in the money-losing company is likely to end badly again. Roaring Kitty, the man who inspired the meme craze of 2021, has resurfaced online with a cryptic image showing a man in a chair leaning forward. This was enough to cause a stir among amateur traders. GameStop shares surged 110% amid multiple trading halts due to volatility. However, from a fundamental perspective, a traditional video game company doesn’t deserve such a jump in its share price. In late March, GameStop said it cut an unspecified number of jobs to cut costs and reported lower fourth-quarter revenue amid growing competition from e-commerce rivals. “I don’t know of anything fundamental that would push the stock that high,” Michael Pachter, a Wedbush analyst who covers GameStop, told CNBC. “They are unable to be profitable.” “They made $6 million last year and burned through the money,” 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 don’t have a plan that suggests they can grow revenue or profits, and their core business is in decline.” GME 5D Mountain GameStop Pachter has underperform rating on GameStop and $5.60 price target. GameStop peaked at $38.20 on Monday. During the 2021 mania, GameStop stock hit an all-time intraday high of $120.75, adjusted for the subsequent 4K stock split. 1 in the summer of 2022. But when 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 resurgence of the meme stock craze comes at a relatively quiet time. for the broader market: The first-quarter earnings season is winding down and the next Federal Reserve meeting is about a month away. The Cboe Volatility Index, known as the VIX or Wall Street Fear Indicator, rose above 20 last month, but has recently risen above 20. it’s trading around 13. Jeff de Graaf, chairman and CEO of Renaissance Macro Research, said that while he’s not involved in GameStop trading at all, he may try to take advantage of the meme stock’s wild swings. “We don’t trade that kind of stuff, but we tend to trade overbought downtrends. That’s all GME means to us,” de Graaf told CNBC. However, the surge in enthusiasm could spell trouble for the broader market, which is already sensitive to changing expectations about the direction of interest rates. “If we are still in this type of market, perhaps Jerome Powell should raise interest rates to the moon,” Bernstein analyst Mark Schilsky said in a note to clients.
