Kohl’s shares soared Tuesday as investors piled in amid renewed exuberance for so-called meme stocks.
The struggling department store’s stock price jumped nearly 38%, or $3,92, to close at $14.34 a share. Like other beaten down stocks suddenly embraced by retail investors, Kohl’s has benefited this month from buzz in online investor communities like WallStreetBets, the Reddit forum that in 2021 helped power the starting market gains of companies like GameStop, BlackBerry and AMC Entertainment.
Kohl’s has faced tepid sales growth as it struggles to attract budget-conscious shoppers still hurting from elevated inflation. In May the retail chain, which has roughly 1,100 stores around the U.S., reported a fiscal first-quarter loss of $15 million and that net sales fell more than 4% from the year-ago period.
Also that month, Kohl’s fired then-CEO Ashley Buchanan after the company found that he had violated its conflict-of-interest policies by hiring a vendor with whom he had a personal relationship and failing to disclose it.
Hockey-stick increases in a company’s shares even as it loses money is typical of meme stocks, which can surge as retail investors in pursuit of a quick killing crowd into the stock — often at the expense of other investors who have shorted, or bet against, the company.
Other companies that have rallied of late, largely driven by good vibes, include online real estate company Opendoor Technologies and mobile camera maker GoPro.
Noted hedge fund manager Eric Jackson ignited the frenzy in Opendoor shares with a July 14 post on social media that touted what he described as the company’s long-term upside for investors.
“If $OPEN goes to $12B in revenue in a few years (already the Bloomberg consensus estimate)… And if the market gives them a 5x EV/revenue multiple again (as it did at the 2021 peak)… That’s a stock price of $82. 100x from here,” he wrote.
“Giant red flags”
Ihor Dusaniwsky, head of predictive analytics at market reserch firm S3 Partners, referred to companies like Kohl’s as “Battleground Stocks” in which individual investors clash with short sellers betting against the companies.
“In this charged atmosphere, even a single dollar of uncommitted capital — dry powder waiting in the wings — can unleash a stampede, tipping the balance in a heartbeat and generating jaw-dropping price swings within a single session,” he said in a research note. “It’s not just investing — it’s a tactical war zone where sentiment and strategy collide.”
Some Wall Street analysts also think the latest surge in meme stocks could signal that equities, which have hit new highs in recent weeks, could be cresting.
Adam Crisafulli, head of investment advisory firm Vital Knowledge, said in a report Tuesday that the spikes in stocks like Kohl’s and Opendoor “act like giant red flags” for the market and that “froth this extreme is never a good sign,” while noting that corporate profits overall remain solid.
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