Meme stocks are essentially shares of a company that have gained immense popularity through social media. Keith Gill, better known as “Roaring Kitty” on social media, helped start this craze, which became amplified through the subreddit r/wallstreetbets.
This led to the price of meme stocks exploding before subsequently dying down. This has happened again quite recently, with Gill’s return to social media. Meme stocks that were thought to be dead or dying suddenly showed signs of life.
Because meme stocks tend to trade more on internet chatter and not business fundamentals, they aren’t investments for a buy-and-hold portfolio. If you do own any meme stocks, you might want to sell them before June 21. That’s when some fairly prominent call options Gill owns expire. You may want to get out before the meme stock trade crashes.
GameStop (GME)
GameStop (NYSE:GME) is a retailer that focuses on the videogame and gaming niche. It operates through both a physical and online marketplace. While it is quite U.S.-centric, GME also operates in Canada, Australia and Europe. It is on GME that Gill owns the expiring stock options.
After a bombshell disclosure by Keith Gill, who showed that he had tens of millions of dollars invested in GME, the stock went up by over 70% at one point. That made the value of his contracts briefly worth $340 million.
However, this also made GME grossly overvalued — by an average of 66.07% as per analysts. The company has missed the last two earnings estimates and has seen negative quarterly revenue growth of 28.70%.
Additionally, there are no strong growth catalysts for GME at the moment. Recently, CEO Ryan Cohen said the company would focus on cutting costs in the upcoming days. While this is a welcome change, when combined with declining sales and other factors, this puts GME in a precarious situation. Thus, I believe that it is time to offload this meme stock.
AMC Entertainment Holdings (AMC)
AMC Entertainment Holdings (NYSE:AMC) is one of the largest theatre chains in the U.S. and the world. Just like GME, although it is primarily U.S.-based, AMC also has operations in Europe. It is currently trading at a valuation of $4.86, with AMC stock being down 88% over the last year, showcasing its inherent volatility.
Despite annual revenue increasing, AMC continues to lose money. Additionally, over the last three quarters, the chain has begun to see its revenue decline. AMC is still producing losses as well, though last quarter they did narrow considerably. In addition to this, the company is heavily in debt with $8.99 billion in corporate borrowings, operating leases and exhibitor services agreements It has only $624.2 million in cash and equivalents. A negative free cash flow of -$281.74 million isn’t helping AMC either.
There appears to be a lack of growth prospects as well. Since the pandemic, people have become increasingly attracted to on-demand streaming services such as Netflix (NASDAQ:NFLX), Prime Video, Hulu, etc. This has directly had a negative impact on AMC and there’s no data to suggest the trend is reversing. It makes AMC a meme stock you should sell instantly.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) is an America-based electric vehicle (EV) company. While it is quite ambitious, the fundamentals of LCID do not work in its favor. This has made this once-promising company a meme stock that you should sell.
LCID saw an earnings decrease during its last fiscal year. Despite this, LCID still lost 54.06% more than FY2022. While it has seen decent revenue growth, it loses money on every car it makes. Lucid’s operating margin of -422.55% nullifies the sales it makes. Additionally, the company is carrying EBITDA of -$2.8 billion, which offers excellent insight into the tumultuous nature of the company’s internal operations.
The catalysts for this company offer only grim news. Just last month, analyst forecasts became more bearish for LCID, which carries a negative wave with it. Investors will likely get spooked by this, driving its share price down further. Additionally, LCID recently laid off 6% of its workforce, which certainly isn’t a positive indication, making this a stock you should sell.
On the date of publication, Achintya Pasricha did not hold (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.
