Image Source: Unsplash

No matter which side you were on during the initial meme stock mania in 2021, we can all agree that the market felt like the Wild West.

Out of the bunch, GameStop (GME - Free Report) was the most popular, shaking the market violently with a short squeeze of a magnitude rarely seen.

Of course, other meme stocks, including AMC Entertainment (AMC - Free Report), also became a nightmare for short-sellers, causing violent price swings.

And as we’re all aware, they’re back. Let’s take a closer look at the mania.

Roaring Kitty Returns
 

Roaring Kitty (Keith Gill) was the prominent figure in the initial 2021 meme craze, helping kick off the period by shifting attention toward short sellers. An epic short squeeze ensued in GameStop shares, with other heavily-shorted stocks, such as AMC Entertainment, also causing pain for short sellers.

The excitement subsided over the years until ‘Roaring Kitty’ made a social media post some time back, breaking years of silence. Meme-stock traders clearly heard the call, with GME shares seeing extreme volatility.

GameStop’s Current Standing
 

GameStop reported quarterly results this morning, with sales down considerably from the year-ago period. Shares faced pressure following the release, with GME also announcing a $75 million at-the-market offering.

Image Source: Zacks Investment Research

The company’s outlook has shifted lower, with the stock presently carrying a Zacks Rank #5 (Strong Sell). A short squeeze has fueled the recent action, certainly not reflective of the company’s current earnings outlook.

Final Thoughts
 

Once heavily shorted stocks begin rising, it kicks off a vicious cycle for shorts, who are forced to cover their positions and buy back the shares they borrowed. This leads to massive losses for shorts that cannot cover their positions, while traders enjoy the rollercoaster.  

That’s precisely what happened in 2021 with meme stocks such as GameStop and AMC Entertainment.

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