While they have seen spectacular growth, these meme stocks also reported horrendous losses and shouldn’t be in your portfolio.
Meme stocks are essentially shares of a company that have gained immense popularity through social media. The rise of this trend was catalyzed by Keith Gill, popularly known as “Roaring Kitty” in the digital realm, whose influence spread like wildfire through the subreddit r/wallstreetbets.
This phenomenon led to the rapid escalation in the prices of meme stocks, only to witness a subsequent decline. Recently, Gill reemerged on social media, breathing new life into meme stocks previously deemed lifeless or on the verge of demise.
Given that meme stocks are heavily influenced by online buzz rather than solid business fundamentals, they are ill-suited for long-term investment strategies. If you happen to hold any meme stocks in your portfolio, the wise move would be to divest before June 21. This date marks the expiration of some significant call options held by Gill, signaling a potential downturn in the meme stock saga.
Risky Bets: GameStop (GME)
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GameStop (NYSE:GME) specializes in video games, operating both physical and online stores. Although primarily focused on the United States, the company has a presence in Canada, Australia, and Europe. It is in GameStop that Gill holds expiring stock options.
After an eye-opening revelation by Keith Gill, showcasing his multimillion-dollar investment in GME, the stock surged by over 70% at one juncture. This surge briefly inflated the value of his contracts to $340 million.
However, this meteoric rise rendered GME significantly overvalued, by an average of 66.07% as per analysts. GameStop has notably missed the last two earnings estimates and suffered a substantial negative quarterly revenue growth of 28.70%.
Furthermore, GameStop currently lacks compelling growth catalysts. Despite the recent announcement by CEO Ryan Cohen regarding cost-cutting measures, the combination of declining sales and other factors presents a daunting outlook for GME. Considering these circumstances, it appears prudent to offload this meme stock at the earliest.
Entertainment Buzzkill: AMC Entertainment Holdings (AMC)
AMC Entertainment Holdings (NYSE:AMC) stands as one of the largest theater chains in the U.S. and globally. While predominantly rooted in the U.S., AMC also maintains operations in Europe. Valued at $4.86, AMC stock has witnessed an 88% decline over the past year, illustrating its inherent volatility.
Despite a rise in annual revenue, AMC continues to operate at a loss. Moreover, the chain has experienced revenue declines in the last three quarters. AMC remains in the red, although last quarter marked a significant narrowing of losses. Additionally, burdened with $8.99 billion in debt from corporate borrowings, operating leases, and exhibitor services agreements, AMC’s cash and equivalents amount to a mere $624.2 million. An unfavorable free cash flow of -$281.74 million further exacerbates AMC’s financial challenges.
Furthermore, AMC’s growth prospects appear dim. The shift towards on-demand streaming services post-pandemic has significantly altered consumer entertainment preferences, undermining the traditional theater experience and casting a shadow over AMC’s future viability.
The Decline of Lucid Group Stock: A Cautionary Tale
Lucid Group (LCID) Overview
Lucid Group (NASDAQ:LCID) is an American electric vehicle (EV) company embarking on a tumultuous journey in the stock market landscape. While initially touted as promising, recent developments have painted a bleak picture of this once-celebrated entity.
Financial Indicators and Performance
Blind optimism has overshadowed critical financial indicators plaguing LCID. Despite witnessing a notable earnings decrease in the last fiscal year, the stock plummeted by a staggering 54.06% over FY2022. Even with decent revenue growth figures, Lucid Group operates at a loss on each vehicle manufactured. A stark operating margin standing at -422.55% effectively nullifies its sales. Moreover, the burden of an EBITDA reaching -$2.8 billion only underlines the internal turmoil plaguing the company.
Analyst Forecasts and Recent Events
The dark clouds looming over Lucid Group continue to gather momentum, with recent bearish projections by analysts adding to the looming dread. This pessimistic outlook is likely to drive investors towards panic selling, resulting in a further decline in the share price. Additionally, news of a recent 6% reduction in the workforce serves as an ominous sign, reinforcing the notion that Lucid Group has transformed into a stock that warrants divestment.
