Newegg Stock's Wild Ride: The Meme Stock That Lost Its Mojo

Key Points

• Newegg's shares rocketed 1,220% from May to July before crashing 34.3% in August
• Short interest reached a ridiculous 331% of float, creating an unsustainable squeeze that's now deflating
• At 0.47 times sales, Newegg looks cheap on paper, but this unprofitable e-commerce player remains a gamble

I've watched this Newegg drama unfold with equal parts fascination and horror. As someone who's placed countless orders through their platform over the years, I can't help but feel this stock has become completely disconnected from the actual business.

The Party's Over (For Now)

If you were lucky enough to buy Newegg shares in late May and cash out by July's end, you'd be sitting on a 1,220% gain. Even a measly $1,000 investment would've ballooned to $12,200. But August brought the hangover, with a 34.3% crash that's still ongoing into September.

The company tried highlighting some positive developments in their half-year report: 12.6% revenue growth, shrinking losses (from $25 million to $4.2 million), more repeat customers, and higher order values. New gaming products from AMD and Nvidia supposedly helped drive this improvement.

Did investors care? Not one bit. The stock actually dropped 13% the day after the announcement. It's almost like fundamentals don't matter in this bizarre meme stock universe.

When Shorts Go Naked

What happened here is textbook meme stock madness. Short-seller interest exploded to 331% of float by early July - a mathematically impossible situation that can only happen with naked shorting. This created a perfect storm for a squeeze, pushing prices to absurd heights before the inevitable collapse.

I find it particularly telling that even after August's steep decline, short interest still sits at 85% of float. The bears clearly aren't done yet, and they're circling for more blood.

Here's the kicker - even at its recent peak, Newegg's price was still 90.5% below its five-year high! All this drama looks like a tiny bump on a long-term downward trajectory. This isn't some innovative tech startup being unfairly shorted - it's an e-commerce company that's struggled for years to turn a profit in an Amazon-dominated world.

Bargain or Value Trap?

Trading at 0.47 times sales might make Newegg look like a bargain to some value hunters. But cheap stocks are often cheap for good reasons. The company has yet to demonstrate it can consistently make money in a brutally competitive space where Amazon, Walmart and others have vastly more resources.

I'm not touching this stock until the meme frenzy completely evaporates. There might eventually be a reasonable investment case here, but not while it's still bouncing around like a pinball machine possessed by r/WallStreetBets.

For now, I'll stick to using their website for computer parts rather than risking my portfolio on their stock.