Meme Stocks Making a Comeback: Should Investors Be Worried?

Meme stocks are experiencing a resurgence, with shares of Kohl's and Opendoor surging on Tuesday. The stocks, popular among retail investors, were likely driven by a short squeeze. Speculative assets like cryptocurrencies have also performed well in recent months. Despite the return of meme stocks, equity positioning has yet to reach elevated levels that would put the stock market at risk of a sharp pullback, according to Deutsche Bank.

In a surprising turn of events, the stock market has seen a resurgence of meme stocks, with Kohl's and Opendoor Technologies experiencing significant gains on Tuesday. This resurgence is attributed to a short squeeze, a phenomenon where investors buy shares to drive up the price and force short sellers to cover their positions, leading to a rapid increase in stock value.

Kohl's, a department store chain with 1,600 locations across the country, has surged nearly 50% this week, despite facing numerous challenges. The company has been struggling with weak sales, a revolving door of CEOs, and competition from retailers like Walmart and Amazon. The recent surge in Kohl's stock price is likely due to a short squeeze, as the stock has been the target of short sellers. The company's interim CEO, Michael Bender, is currently leading the retailer while it searches for a permanent replacement for Ashley Buchanan, who was terminated in May due to conflicts of interest [1].

Similarly, Opendoor Technologies, an online-based real estate company, has seen its shares skyrocket this month, with a 28% increase in value on Tuesday alone. The company's stock has nearly tripled in the past week, closing at $2.88 per share on Tuesday, up from its peak of $35.88 in early 2021. The recent gains are attributed to hedge fund manager Eric Jackson, who has been touting the stock on X, formerly known as Twitter. Despite the stock's recent surge, analysts expect Opendoor to continue posting losses in 2025 and 2026, as the company faces a tough housing market with soaring interest rates and a low supply of homes [1].

The resurgence of meme stocks comes at a time when speculative assets like cryptocurrencies have also performed well in recent months. However, Deutsche Bank analysts have noted that equity positioning has yet to reach elevated levels that would put the stock market at risk of a sharp pullback. The Federal Reserve is expected to resume cutting interest rates at its December meeting, followed by two more quarter-point reductions in the first quarter of 2026. The neutral level of the Fed's key policy rate is estimated to stand at 3.625% following these drawdowns [3].

References:
[1] https://www.yahoo.com/news/investors-breathe-life-batch-meme-193158939.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3TJ074:0-deutsche-bank-ag-expected-to-post-earnings-of-70-cents-a-share-earnings-preview/
[3] https://www.investing.com/news/economy-news/fed-likely-to-resume-slashing-interest-rates-in-december-deutsche-bank-predicts-4145706