The Game stop (NYSE:GME) stock price has been making headlines again in recent weeks. This has caught the attention of traders, retail investors and market analysts, reminiscent of the madness that occurred during the 2021 compact squeeze.

So why wouldn’t I touch this stock with a barge?

What’s going on?

GameStop shares are up 70% from Friday’s pre-market closing price. However, when the market opened on Monday, the stock price dropped from about $40 per share to $30.

It is still trading above Friday’s closing price.

As a reminder, GameStop is not a sexy tech store, it’s a video game and collectibles store. Before the meme stock craze of 2021, it was a failing company. Many traders took “short positions” in the stock, believing that the stock price was likely to decline.

Then in 2021, GameStop became the subject of a compact squeeze when Reddit users drove up its stock price, forcing compact sellers to buy back shares at higher prices. This caused short-sellers, including hedge funds, to lose billions of dollars.

Another compact hug

Once again, it’s all about social media.

On Sunday, Keith Gill, who enjoys considerable popularity among the Reddit trading community and goes by the pseudonyms DeepF******Value on Reddit and Roaring Kitty on YouTube and Xposted a screenshot of what many believe to be his portfolio.

The post shows that Gill owns 5 million GameStop shares worth $115.7 million at Friday’s closing price. This followed Gill’s return to social media in early May after a three-year hiatus. On May 12, his post suggesting he was watching the stock sparked a buying frenzy in GameStop.

It’s like a compact squeeze in 2021, only seemingly less successful.

As stock prices surged in May, GameStop raised $933 million through stock sales. Short sales lost as much as $1.5 billion.

Why buy meme stocks?

GameStop shares rallied on the Robinhood 24-hour exchange on Sunday evening and gained further momentum in the pre-market on Monday morning.

The company’s stock is currently up 32% in five days. But why?

Well, as before, the rally appears to be driven by renewed enthusiasm among traders and retail investors, especially those dynamic on social media platforms such as Reddit’s WallStreetBets and r/SuperStonk.

However, these investors do not speculate on the potential of the stock. These are “meme stocks” where retail investor enthusiasm fueled by social media is driving significant price volatility.

Why I don’t invest

Of course, investing in meme stocks could give me the opportunity to make a lot of money quickly. But I’m not desperate and I can lose a lot quickly too.

Instead, I invest for the long term, choosing stocks that are undervalued relative to their prospects.

Although GameStop’s cash position has improved significantly thanks to its recent share sale, I am not invested in the business.

The company’s shares are currently trading at 2,314 times forward earnings. This makes it significantly overpriced and just not something I would consider buying.

It’s worth noting that part of GameStop’s intrinsic value is tied to the likelihood of future meme rallies. However, this is not something I am going to waste my time on.