It may have been a few years since the meme stock feeding frenzy reached its peak, but we still see occasional bursts of meme-like activity in a number of stocks.
No discussion of meme stocks would be complete without OG AMC Entertainment Holdings Inc. A.M.C.
-0.89%.
But while the movie theater chain and the original meme stocks still attract a lot of attention, they no longer fit under the umbrella of a meme stock, according to Alicia Reese, VP of equity research at Wedbush. “AMC has seemingly lost its meme status as its stock price has come back down to earth in recent months, especially since the APE fold-in and reverse stock split,” she said. “AMC is now trading at a more normalized valuation, even though it is still at the upper end of its pre-meme historical range.”
Shares of AMC closed Friday’s session at $6.65, a far cry from their high of $393.63 on June 2, 2021, during the meme stock frenzy.
Related: AMC shares fall more than 5% after the company completes a $350 million stock offering
“AMC’s premium valuation here is driven in part by a subsection of shareholders it acquired during the meme phase, who have remained loyal to the company and have long claimed to be AMC shareholders for life,” Reese added to. “AMC has divested the rest of its meme-era shareholders and is now left lagging behind the lifers, along with some institutional shareholders as its valuation has returned to a more normalized range.”
The analyst believes AMC will continue to issue pre-authorized shares in 2024 to pay down its high debt, as evidenced by the $350 million stock offering completed this week. “The company is focused on getting its balance sheet in order while trying to maintain strong relationships with the AMC lifers who still support the stock,” Reese said.
Fellow original meme stock GameStop has also been in the news recently, with the company’s board of directors approving a new investment policy, allowing the company to invest in stocks, among other things. The board also gave Chairman and CEO Ryan Cohen the authority to manage the investment portfolio. The new policy was called ‘alarming’ and ‘pointless’ by Wedbush director Michael Pachter.
“If he can invest in anything — farmland, chicken feed, cryptocurrency — it’s not in the best interest of shareholders,” he told MarketWatch. “Heaven knows what he will do.”
Related: GameStop’s plan to buy stock with company cash is ‘alarming’ and ‘pointless,’ analyst says
As for GameStop, the analyst describes the video game retailer as a declining business, pointing to the company’s third-quarter revenue of $1.078 billion, down from $1.186 billion in the previous year’s quarter. “They are shrinking, period, and they cannot save their way to prosperity,” he added.
The company’s new investment policy could also spur more meme-like activity, according to Pachter, who says Cohen’s moves will be closely watched. “He will invest in something and it will potentially become the next meme stock,” the analyst told MarketWatch.
Pachter pointed to Cohen’s decision in 2022 to offload his massive stake in beleaguered home goods retailer and sometimes meme stock Bed Bath & Beyond Inc. just months after purchasing it. In August of that year, Cohen sold his entire stake in Bed Bath & Beyond, five months after building up the stake in an activist campaign, netting a profit of more than $58 million.
Stocktwits, a social platform for investors and traders, told MarketWatch that it has seen a dedicated core audience of retail investors sticking with the likes of AMC and GameStop. “Post counts and sentiment on the platform have remained high throughout the year, with audience growth temporarily around earnings or other events that drive volatility,” Tom Bruni, senior writer at Stocktwits, told MarketWatch.
Related: Chinese small-cap stocks are creating a meme-like buzz
Retailers are still wary of high-volatility situations, said Bruni, who cited the example of Vietnamese electric vehicle stock VinFast Auto Ltd. VFS:
+13.54%,
who had a ‘crazy month’ in August before collapsing again. “We note, however, that there have been fewer cases of these types of meme stocks this year, and their lifespan has generally been quite short,” he added.
“For stocks with ‘meme’ potential in 2024, look to defeated parts of the market that already have a strong private investment community around them,” Bruni told MarketWatch. “Some that stand out are electric vehicle stocks (particularly startups), solar stocks or anything related to China. Traders will likely look for stocks at the intersection of these themes, such as Lucid Group ($LCID), as potential ‘powder kegs’ for volatility in 2024.”
Shares of Lucid Group Inc. LCID,
-7.20%
are down 30.2% in 2023, compared to the S&P 500 index’s SPX gain of 22.9%.
One thing is certain: the social media momentum that created the meme stock phenomenon is not going away. “Internet culture will become increasingly prevalent in markets as the world becomes more digitalized and young people become more involved,” Tommy Tranfo, head of community at Stocktwits, told MarketWatch. “Cryptomarkets are an area where we expect to see a large concentration of this activity, especially within the context of a crypto bull market, which will likely bring a new wave of market participants focused on the demo of internet culture.”
Related: This EV company has a larger market cap than Ford or GM. But maybe you’ve never heard of it.
“New crypto meme communities like the $BONK (a dog-themed coin on the Solana blockchain) are already clear examples of this craze taking place,” he added.
