Meme Stock
A stock that becomes a topic on social media and online communities and spikes as retail investors pile in, regardless of results.
In plain terms
A meme stock spikes as retail investors pile in after it becomes a topic on online communities (Reddit in the US, etc.) and social media, regardless of company results.
2021 GameStop and AMC are the classics. A mood of "let's all buy and stand against the shorts" spread on social media and sent prices soaring. Buzz and crowd psychology, not fundamentals, made the price.
What it tells you
A meme stock shows in the extreme that "a price moves on attention and psychology, not value." It is a new phenomenon where, in the social-media age, retail investors gathering can shake the market short-term.
But a price risen on buzz fades fast when attention cools. So always remember that with a meme stock, "why it is rising" is mood, not results.
Formula
meme stock = a stock that spikes and plunges on social-media buzz and crowd psychology rather than fundamentals (results, financials) (2021 GameStop and AMC are the classics)
What high or low means
It shows an extremely volatile flow — spiking when buzz explodes on social media, then plunging when attention cools or the mood breaks.
Since the reason for the spike is psychology and supply-demand, not fundamentals, both the rise and fall are often far removed from company value.
Mistaking a meme-stock spike for "the company got better" is risky. A price risen on buzz has a weak basis and can fade in an instant, with those who jumped in late stuck the worst. (This is a concept explainer, not a trading suggestion.)
A meme stock is where FOMO ("chasing in for fear of missing out") appears most extreme. The more the crowd piles in, the cooler you must stay.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Meme and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.