Investors know that the current expectations project rate cuts as early as March. The news is a major positive for the economy overall and suggests that we have avoided a recession. It affects stocks, including everything from value to growth to meme stocks.
That’s where we’ll be focusing today in this article: meme stocks. Generally speaking, meme stocks are becoming more attractive because they are riskier and growth-oriented. Those kinds of firms tend to do well in lower-rate environments. However, investing is never as simple as that. So, let’s look at seven of the more prominent shares in that conversation.
GameStop (GME)
I think the outlook for GameStop (NYSE:GME) remains the same whether interest rates are high or low. I don’t think any investors should run the risk inherent in owning GameStop.
The company just released earnings, which weren’t good. GameStop’s revenues were worse than expected. However, bullish Investors are taking heart in the company’s announcement that it will alter its investment strategy. The company announced that it will now invest in equities, whereas it had previously directed its cash toward primarily government securities.
Investors should ignore this as a purported positive catalyst.
Hardware and software sales fell by roughly $30 million during the period. GameStop continues to head in the wrong direction. The only positive for the company really was that its net loss narrowed from $94.7 million to $3.1 million during the period. However, that was only a result of the drastic decline in SG&A expenses. Even with rate cuts that promise to pull everything higher in 2024, GME stock remains one to avoid.
AMC (AMC)
If you mention GameStop and its stock, you must also mention AMC (NYSE:AMC). While some meme investors will continue to remain bullish on AMC, I think it’s also wise to avoid it along with GameStop.
Not much has happened since AMC last reported results in early November. Investors who remain curious about AMC should simply look at those earnings results and the company’s decisions immediately after that release.
The results themselves were arguably positive. AMC generated a small profit of $12.3 million and an eight-cent EPS. Revenues increased by 45.2%, reaching $1.405 billion. Yet, AMC shares continue to move lower after the earnings report.
That’s partially explicable by decisions in the immediate wake of those earnings. AMC announced an additional stock offering that further dilutes current shareholder value. Further, movie attendance is still 16% lower than it was before the pandemic. That strongly suggests that the movie theater experience is not as attractive as it formerly was, which bodes very poorly for AMC.
AMD (AMD)
AMD (NASDAQ:AMD) is going to continue what it does and challenge the competition for artificial intelligence market share. Pundits will continue to argue whether AMD has any realistic chance of catching its main rival, Nvidia. My advice, for what it’s worth, would be to avoid that argument and invest in both.
AMD recently announced its Instinct M1 300x accelerators at an event in San Jose. The company states that the new chips surpass Nvidia’s H100 chips in many respects. AMD claims that its chips will exceed application specifications for large language models (LLMs) but at a fraction of the price.
So, what should investors take away from the news? The answer is simple: AMD will continue to challenge Nvidia and its dominant position in the generative AI space and AI in general.
Yes, Nvidia’s chips and its talent are very likely better overall. That doesn’t mean there isn’t much room for AMD and others to carve out significant, profitable niches within the AI boom.
Tesla (TSLA)
Discussion about Tesla (NASDAQ:TSLA) and its stock is currently being dominated by news regarding the Cybertruck.
Deliveries of the much anticipated electric truck have begun in California and Texas. The company announced that deliveries in further states are to follow in 2024. It looks like those deliveries are for the top-of-the-line ‘Cyber Beast’ version. It also appears that those deliveries cost just above $122,000. It was previously expected that the top-of-the-line Cybertruck would cost just under $100k.
At the same time, investing in Tesla is really about whether to invest in the company as its profitability decreases. Tesla has slashed the prices on various models throughout 2023. The company is moving toward a model that relies heavily on volume to capture a more significant market share. I don’t think that invalidates Tesla as an investment at all. It remains a straightforward question: are there any better EV stocks? The answer is no.
Nvidia (NVDA)
As mentioned in my discussion of AMD, I believe in Nvidia (NASDAQ:NVDA) and its stock. It isn’t a case of choosing A or B about the discussion of AMD and Nvidia. Choose both.
Nvidia has skyrocketed in 2023 because it is the leading chip manufacturer concerning the generative AI boom. The company’s H100 and A100 chips have been in high demand because they are the best. AMD’s new chips promise to challenge those chips and their dominance in data center applications.
Of course, Nvidia also recently announced its h200 chips, an improvement upon its h100 chips. Those chips are expected to be commercially available sometime in the second quarter of 2024. AMD’s new chip is also expected to be commercially available around the same time.
Both companies will continue to compete for market share in the sector. Nvidia h100 chips are in Greater demand, but AMD and its shares have not faltered at the same time. That means that the market understands that AMD is very much a competitor in the space. In other words, invest in both Nvidia and AMD for a chance at continued gains due to generative AI and large language models.
WeWork (WEWKQ)
WeWork (OTCMKTS:WEWKQ) is and was a poorly run company in weak stock that investors should avoid.
Sometimes, you have to laugh at the statements that come out of the mouths of the company’s management. The company very recently filed for Chapter 11 bankruptcy and is currently in the process of restructuring. It has failed. It is hardly the time to make bold, arguably arrogant statements regarding its strengths. Yet CEO David Tolley Continues to refer to WeWork as the “leader in flexible work.”
WeWork is a leader in the space, but it’s a space that includes very few other firms. The company took on more than 4 billion dollars in debt to develop areas for remote workers for which demand never materialized. Now, the company Is rejecting 60 of those leases to slash its debt by roughly $3 billion. The only thing we work has proven to investors is that it’s phenomenally inept. No one should believe in the company, its leaders, or its forward vision.
Peloton (PTON)
Peloton (NASDAQ:PTON) continues to deliver losses to investors. The entire purpose of a stock is to increase in value, have growing earnings, and provide value overall to investors. Peloton is not going to do that, which is why investors must avoid it.
Investors need to do nothing more than look at the company’s fundamentals to understand why it is a poor investment. The company’s membership numbers continue to decline. The number of Peloton members fell by 1% quarter over quarter. While that isn’t a significant decline and suggests that the membership losses are near zero, it’s still not a reason to invest.
Peloton reported a net loss of $159.4 million this quarter. Evidently, the company expanded too fast to take advantage of pandemic shutdowns and doesn’t have a sound business. There’s not much more to say about it Other than to reiterate that investing in PTON shares is a bad idea.
On the date of publication, Alex Sirois 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.
