NEW YORK (AP) — As the stock market pushes into record territory and bargains become harder to find, investors are once again turning to some of Wall Street's beaten down companies in hopes of a quick score.
The latest so-called meme stocks are the department store Kohl’s, which has surged this week, and the online-based real estate company Opendoor Technologies, which has skyrocketed this month. Both companies have been struggling in their respective sectors.
Wall Street defines a meme stock as a stock that
gains significant popularity and trading volume, primarily driven by social media hype and online communities, rather than the company’s fundamental financial performance. Think GameStop and AMC Entertainment in 2021, and a few subsequent instances.
Often, meme stocks are initially the target of “short sellers,” or investors betting against the stock. If other investors start buying the shares and boost the price, that could prompt the people betting against the stock to buy more shares to cushion their own losses.
Kohl’s, which operates 1,600 stores across the country, has risen almost 50% this week as of midday Tuesday. It is wrestling with a number of challenges including a revolving door of CEOs and weak sales.
In May, it announced it had terminated its new CEO Ashley Buchanan after an investigation determined that he directed the retailer to engage in vendor transactions that involved undisclosed conflicts of interest. Kohl’s named Chairman Michael Bender as interim CEO as it searches for a replacement. Buchanan’s appointment marked the third CEO for Kohl’s in three years as the department store struggles to reverse sluggish sales.
Its middle income shoppers have pulled back on discretionary spending in the face of still-high prices for necessities. It’s also faced stiff competition from Walmart and Amazon, which have been improving their fashion offerings at affordable prices. Now, like many retailers, it’s facing higher costs from President Donald Trump’s tariffs.
Opendoor shares are up more than 40% this week after nearly tripling last week. Overall, they are up more than fivefold in July, trading at $2.81 per share Tuesday afternoon. That's still far below their peak of $35.88 in early 2021.
The stock's recent gains come as hedge fund manager Eric Jackson touts the stock on X, formerly known as Twitter. On July 14, he said his hedge fund, EMJ Capital, took a position in Opendoor and expects growth over the next few years.
The real estate services company, which also buys and flips homes, has yet to notch an annual profit. Analysts polled by FactSet expect it to continue posting losses in 2025 and 2026. The company faces a tough housing market. Soaring interest rates and a low supply of homes on the market have made it difficult for homebuyers. Those same factors have also made it less likely for current homeowners to sell their homes, especially those with lower interest rates.
The original meme stock is video game retailer GameStop. In 2021, the company was struggling to survive amid the switch from discs to digital downloads and major investors were betting against the company. Investor Keith Gill, better known as “Roaring Kitty,” rallied other investors to join him in buying up thousands of GameStop shares, changing the trajectory of the stock.
GameStop had been trading under $5 heading into 2021. The stock was trading around $23 as of Tuesday.
The initial meme stock craze eventually fizzled out. But the frenzy occasionally reignites, as seen the past few years with sudden gains for BlackBerry, Bed, Bath & Beyond, and Chewy.
Investors who buy now are betting that the momentum will continue, but it can shift suddenly.
It took just four weeks in 2021 for GameStop’s stock to go from less than $5 to more than $120. But it has yet to touch that price again. Blackberry quickly jumped from less than $7 to nearly $30 in early 2021, but the gains were shaky and trimmed back within a year. It is now trading at about $4.
___
AP Business Writer Anne D'Innocenzio contributed to this report.
