When it comes to meme stock news as of late, Keith Gill has certainly been the driver of most investor attention to this space. Various meme stocks have surged on Roaring Kitty’s involvement in simply noting his trades. Much of this sentiment makes sense when one harkens back to the price action of 2021 and the incredible meme mania we saw then.
That said, many top meme stocks have since lost their luster and momentum, falling once again on strong short-seller interest. The question is whether retail investors have enough juice to support the top meme stocks and propel them higher, particularly as many of the management teams behind these beaten-down businesses look for reasons to sell shares into any strength to raise capital.
Let’s dive into the top three meme stocks that could be poised to crash and burn if this trend continues.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) stock has mostly languished this year, punctuated by brief spikes such as a 135% surge over two days. Despite hopes among meme-stock enthusiasts for a revival akin to 2021, sustained positive momentum seems unlikely. While many may remain cautious about AMC, others may certainly be considering the potential catalysts that could transform its fortunes.
Much ado has been made around blockbuster movie slates, improving foot traffic, and rising ticket prices. But overall, these trends have been nowhere near enough to stop the bleeding from a loss perspective. The company has been forced to restructure its debt and extend maturities, moves that have offered glimmers of hope for certain investors. However, many others have viewed these moves skeptically, and rightfully so. AMC remains a heavily debt-burdened company with an operating model that appears to be fundamentally unsound.
Despite a recent uptick, AMC’s long-term outlook remains bleak. The company’s reliance on increasing its share count to boost its balance sheet amid historically low foot traffic suggests unsustainable outcomes over the long term. Many see parallels with Blockbuster’s fate, viewing AMC as surviving on borrowed time despite retail investor support.
GameStop (GME)
As a top video game retailer, GameStop (NYSE:GME) has been seeing growth deceleration pick up in recent years. Of course, the pandemic didn’t help. And when the company was in its darkest days, it’s true that Keith Gill and millions of other retail traders stepped in to save the day.
The thing is, investors have to question whether this is really a viable long-term investing strategy. The company’s previous surges were clearly speculative in nature. And it’s unclear whether the so-called “apes” and “degenerates” that supported GameStop the last time around will have enough dry powder to do so again.
While GME is still appealing to fans of gaming due to its consoles, merchandise, and video games, the numbers tell a different story. GameStop’s revenue saw a 29.7% drop year-over-year, while the market only anticipated an 11.4% decline. This past quarter was particularly challenging, marked by revenue and EPS shortfalls without providing a future outlook. GameStop’s stock plummeted 45.5% post-results, now trading around $27 per share.
Chewy (CHWY)
Chewy (NYSE:CHWY) saw a steep decline in its shares in recent days as investors reassessed signals from meme stock influencer “Roaring Kitty.” Initially, Chewy surged 34% last week after Keith Gill posted a cartoon dog on his X account, hinting at potential interest in the retailer. However, following news that Keith Gill had officially bought 6.6% of outstanding Chewy shares, amounting to roughly $250 million in the pet products retailer, shares of CHWY stock have been on a rather protracted downtrend.
We’ll have to see if this continues. Gill’s bet on Chewy is certainly one that falls into the curious category for many investors. The company’s troubled financial picture is one that many long-term value-focused investors wouldn’t touch.
But for Gill, this is the kind of beaten-down stock with a turnaround story (and leadership from Ryan Cohen) that could have the potential to surge. We’ll have to see. But for now, I think speculating on such a stock may be very foolish.
On the date of publication, Chris MacDonald 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
