After a logic-defying 2021, the meme stock frenzy has made a return of late. Individual traders’ willingness to jump on riskier trades and bet against short-selling hedge funds has led the frenzy to make a comeback, as was evidenced during the recent skyrocketing rally of Bed Bath & Beyond Inc. (BBBY). However, the stock has fallen drastically since late August.
The rapid up move in meme stocks that are not backed by fundamentals or positive news has always had a terrible ending. Despite significant gains, most meme stocks slumped to record lows, wiping out almost all of their gains from the short-lived rallies.
With the Fed reiterating its stance of aggressively hiking interest rates until inflation falls to 2%, the stock market will likely remain under pressure in the upcoming months. Therefore, we think it could be wise to stay away from meme-tagged stocks AMC Entertainment Holdings, Inc. (AMC) and Marathon Digital Holdings, Inc. (MARA), given their weak fundamentals and poor growth prospects.
AMC Entertainment Holdings, Inc. (AMC)
AMC is a leading theatrical exhibition company that delivers distinctive and movie-going experiences. It operates more than 950 theaters and 10,600 screens. It appeared on r/wallstreetbets 32 times over the past 24 hours.
In the second quarter ended June 30, 2022, AMC’s operating costs and expenses increased 59.5% year-over-year to $1.18 billion. Its operating loss and net loss narrowed 94.6% and 64.6% from their year-ago values to $16.10 million and $121.60 million, respectively. Also, AMC’s adjusted loss per share came in at $0.20, narrowing 71.8% year-over-year.
Analysts expect AMC’s EPS for fiscal 2022 to remain negative. Its EPS is expected to decrease at 217% per annum over the next five years. Over the past year, the stock has lost 81.8% to close the last trading session at $8.64.
AMC’s POWR Ratings reflect this bleak outlook. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Stability and Sentiment. Within the F-rated Entertainment - Movies/Studios industry, it is ranked #6 out of 7 stocks. Click here to see the other ratings of AMC for Growth, Value, Momentum, and Quality.
Marathon Digital Holdings, Inc. (MARA)
MARA is a digital asset company that focuses on the blockchain ecosystem and the generation of digital assets. The company holds bitcoins in an investment fund. It has received three mentions on r/wallstreetbets over the past 24 hours.
On August 1, 2022, MARA expanded its credit facility by increasing its existing debt funding capacity by $100 million. This debt facility is expected to increase the company’s debt burden.
MARA’s revenues for the fiscal second quarter ended June 30, 2022, decreased 15% year-over-year to $24.92 million. Its operating loss widened 61.6% from the year-ago value to $178.21 million.
The company’s net loss came in at $191.65 million, widening 76% from the year-ago period, while its adjusted EBITDA loss widened 40.1% year-over-year to $147.20 million. Also, its loss per share widened by 60.5% year-over-year to $1.75.
Analysts expect MARA’s EPS to remain negative for fiscal 2022. Its revenue for the quarter ending September 30, 2022, is expected to decline 41.3% year-over-year to $30.35 million. It has failed to surpass the consensus EPS estimates in each of the trailing four quarters. The stock has lost 71.6% over the past nine months to close the last trading session at $13.26.
MARA’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The stock has an F grade for Growth, Value, Stability, Sentiment, and Quality. Click here to see MARA’s rating for Momentum.
AMC shares were trading at $9.42 per share on Friday morning, up $0.78 (+9.03%). Year-to-date, AMC has declined -65.37%, versus a -14.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
2 Stocks to Stay Away From as the Meme Frenzy Returns StockNews.com
