Yesterday, meme stock investors got news many had been waiting for: GameStop (NYSE:GME) named Ryan Cohen as Executive Chairman. The company also ousted CEO Matthew Furlong. Previously, Cohen had served as a GME chairman. One of the best known names in the meme community, he rose to prominence after taking an activist stake in GameStop in 2020 and shaking things up in 2021.
This reputation has earned Ryan Cohen the title of “meme stock king.” But although his influence at GameStop continues to grow, GME stock is struggling significantly right now. Other meme stocks aren’t faring much better.
The underlying message? The r/WallStreetBets crowd may have misplaced its faith.
No Rally for Meme Stocks
When GME stock rallies, it’s quite common for other meme stocks to move in solidarity. Names like AMC Entertainment (NYSE:AMC) or Bed Bath & Beyond (OTCMKTS:BBBYQ) typically ride the wave created by any positive momentum for GME. After the company announced Cohen’s appointment, a meme stock rally seemed like a distinct possibility. Unfortunately for investors, though, that scenario hasn’t played out.
On the contrary, GameStop is falling today and its peers are following suit. As of this writing, GME is down more than 15% for the day. Meanwhile, AMC is down about 1%. Finally, both BBBYQ stock and popular meme stock Mullen Automotive (NASDAQ:MULN) are down more than 8%.
It’s important to note that there are other forces at play here. GameStop also just reported first-quarter earnings and the results were disappointing. Both revenue and adjusted EPS came in worse than expectations. While the news wasn’t all bad, it certainly wasn’t enough to push GME stock into the green today.
As is the case with any mixed earnings report, when the bad overshadows the good, investors shouldn’t ignore it. Clearly, GameStop’s attempts to cut costs haven’t been sufficient. Now, as a last ditch effort, the company is giving Cohen more power in an attempt to recapture some of the 2021 momentum that turned GME into a stock to watch.
InvestorPlace’s Eddie Pan recently raised a question all investors are wondering: Can Ryan Cohen save GameStop? While the answer isn’t clear right now, signs point to no. News of the meme stock king being granted a new leadership position didn’t help GME stock rise today, nor did it help other meme stocks climb.
GameStop’s sad Q1 earnings report is likely due to factors recently outlined by InvestorPlace’s Thomas Yeung:
“[GameStop] is a prime example of a geriatric company that’s failing to adapt. According to its most recent filings, 84% of its revenues still come from hardware, accessories and videogame software — products readily available online. Management has failed to make much headway in Web 3.0 gaming and NFTs.”
Yeung ranks GME as a meme stock that investors should ditch while they still can. His list also includes Mullen and Bed Bath & Beyond.
The Game Stops Here
The faith with which retail investors have stuck by GameStop is truly remarkable. But days like this are a good reminder of why meme stocks are dangerous and should generally be avoided. Even when the headlines are mostly positive, these companies can fail to garner momentum. We saw this from AMC in May, when the company touted its retail investor army. We’ve also seen it from MULN and BBBYQ multiple times in 2023.
Today, we saw it from GameStop, the de facto north star for unstable companies. Ryan Cohen can’t spark a sustainable meme stock rally because, at the end of the day, no one can.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.