Krispy Kreme, Inc. (NASDAQ:DNUT) has entered the arena as the latest heavily-shorted stock to join the meme stock battle as rallies in Opendoor Technologies, Inc. (NASDAQ:OPEN) and Kohl's Corp. (NYSE:KSS) fizzled on Wednesday.
What To Know: Krispy Kreme, a stock with enormous short interest, soared as much as 34.4% in premarket trading on Wednesday following a nearly 27% rally on Tuesday.
Krispy Kreme's move came after Opendoor, Kohl's and GoPro, Inc. (NASDAQ:GPRO) soared in an apparent revival of the meme stock movement.
"Krispy Kreme seems to be the latest addition to the frenzy," Daniela Sabin Hathorn, senior market analyst at Capital.com, wrote in a note released Wednesday.
"Like the others, there was no significant news to justify the rally — just sheer retail momentum," she added. "The move underscores how meme-stock dynamics remain alive and well, driven more by investor enthusiasm and positioning than corporate performance."
Sabin Hathorn pointed to several contributors to renewed interest in so-called meme stocks.
"First, retail trading forums and social platforms have once again become engines of crowd momentum," she wrote. "Second, these stocks are all heavily shorted, setting the stage for violent short squeezes when buying pressure ramps up."
All of the stocks involved in the most recent meme stock rally have significantly high short interest.
According to data from Benzinga Pro, short interest makes up 32% of Krispy Kreme's public float. For comparison, Opendoor's short interest sits at 21%, and Kohl's is even higher at 47%. The original meme-stock, GameStop Corp. (NYSE:GME), has a short interest of 18.9% of its float.
Sabin Hathorn warned about the risks that accompany meme stock movements, but she left the door open for what could lie ahead.
"Whether this is the start of a sustained retail-driven rally or just another brief flare-up remains to be seen. Either way, it's a powerful reminder that market psychology and crowd behavior can sometimes matter more than the numbers," the analyst wrote.
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