Meme stocks are exciting, and they often seem like a way to make a ton of money in a short amount of time. The rise of Wall Street Bets and the retail trading movement in 2021 changed America’s financial markets. In particular, traders took a liking to a lot of smaller or more obscure companies that might otherwise slip off of Wall Street’s radar.
However, while this sort of trading is exciting, the truth is that most risky meme stocks have poor fundamentals. After all, if a company had a high level of profitability and a strong business outlook, it would probably trade at a high valuation regardless of social media’s backing.
In particular, with these worst meme stocks for August, it’s time to sell before the party ends. These stocks may be popular right now, but there’s little guarantee that the popularity will last. Once the meme status wears off, there is little to otherwise justify owning these three meme stocks in August and beyond.
T2 Biosystems (TTOO)
T2 Biosystems (NASDAQ:TTOO) is an in vitro diagnostics company. It offers products such as T2Dx Instrument, T2Candida and T2Bacteria which allow clients to test patient samples for a wide variety of pathogens, biomarkers and/or other abnormalities.
TTOO stock has not had a good run throughout the past year. It fell deep into penny stock territory earlier in 2023 as the company’s operating results have continued to disappoint. With just $17 million in annual sales and operating losses well in excess of that mark, T2’s long-term future seems grim.
That said, TTOO stock got a boost recently. The Nasdaq gave T2 Biosystems an extension for getting back in compliance with its listing requirements. T2 will now have until later in November to get its share price back above $1, and otherwise regain compliance with Nasdaq rules.
That’s good news, to be certain. However, it hardly offsets the bigger issues; unless T2 dramatically boosts revenues or slashes expenses, its balance sheet will be under heavy strain. Meanwhile, TTOO stock has soared from a low of 5 cents back up to 30 cents on the recent meme excitement. That seems like far too large of a move for such a modest development as a Nasdaq listing extension.
Tilray (TLRY)
Tilray (NASDAQ:TLRY) is a long-struggling cannabis company. Since its euphoric peak in 2018, TLRY stock has gone on to lose approximately 99% of its value.
Tilray has grown to be a decent-sized business; it generated more than $600 million in revenues last year. Unfortunately, this has not resulted in a profitable business; Tilray lost an astonishing $1.4 billion throughout the past 12 months. Simply put, the marijuana market simply hasn’t developed in the way that Tilray’s management had hoped.
So, it was time for a pivot. On Tuesday, Tilray announced a surprising move; it will be heavily leaning into the craft brewing business. Specifically, it is buying $85 million of beer brands from Anheuser-Busch InBev (NYSE:BUD); acquired brands include Shock Top and Red Hook.
TLRY stock popped 36% on the news. It’s not hard to understand the enthusiasm as Tilray shifts from its money-losing marijuana operations toward a more profitable industry. Still, beer has proven to be highly competitive, and Tilray is buying brands from Anheuser-Busch InBev. Traders shouldn’t count on Tilray’s beer venture to turn the firm’s fortunes around overnight.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) has been one of the longest-running meme stocks. However, the magic may be running out on this one.
The economy has been reopened for quite a while now, and yet movie theater attendance has struggled to recover to pre-pandemic levels. Yes, there is the occasional blockbuster movie, such as Barbie that generates a box office boom. However, on average, the data remains disheartening.
As such, AMC is in trouble. It has a ton of debt, and rising interest rates will make it more costly for AMC to service those obligations. The company attempted to deal with much of its debtload by issuing more stock, but shareholders blocked that initiative.
As a second effort, AMC created its AMC Preferred Stock (NYSE:APE) as a unique mechanism to generate more funding. Unfortunately, that has gotten tripped up in legal issues as well. The fact is that AMC likely needs to raise a lot more money, and it’s not clear if it will be able to raise funds in a timely fashion. All this could have AMC inching closer to bankruptcy.
All in all, AMC has been one of the more impressive meme stock phenomena. Unless its financial outlook radically improves, AMC seems doomed to be heading toward penny stock territory.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
