The meme-stock craze continues to dominate the stock market, with a spectacular recovery in shares of companies like GameStop and AMC Entertainment. After an impressive rally on Monday, Tuesday saw further acceleration. But how will it all end
?
Table of Contents:
Meme-Stock performance
Monday’s Rally
GameStop (NYSE:GME) shares rose 74.4% to $30.45 on Monday. Shares of AMC Entertainment (NYSE:AMC) rose 78.35% to $5.19, while shares of headphone maker Koss (NASDAQ:KOSS) rose 38.29% to $4.37.
These titles had already been protagonists in 2021, and their rebirth seems to continue
.
Tuesday’s performance
On Tuesday, GameStop continued to rise, recording an additional 60% from the previous day’s close. AMC Entertainment saw an 80% increase, and Koss earned another 33%. This rally shows that investor interest in these meme-stocks has far from diminished
.
Fundamentals of Companies
GameStop
GameStop’s fundamentals don’t justify the stock price surge. In the fourth quarter, net revenues fell to 1.794 billion dollars compared to 2.226 billion in the same quarter of the previous year. In addition, cash flow decreased from 1.139 billion to 921.7 million
dollars.
AMC Entertainment
AMC Entertainment is also having financial problems. As of December 31, 2023, the movie chain’s long-term debt amounted to 4.5 billion dollars. Revenues in the first quarter of 2024 fell to 951.4 million dollars compared to 954.4 million in the first quarter of 2023. Additionally, AMC recently sold 72.5 million shares to raise new capital, raising concerns about the dilution of the
stock price.
The Market Context
Speculation and Reddit
Speculation is nothing new for these companies. In 2021, Reddit users pushed the prices of these shares to vertiginous levels, taking advantage of favorable market conditions, with relatively low interest rates and inflation. This week, the rebirth of retail trading was fueled in part by the return of Keith Gill, known as ‘Roaring Kitty’,
to the X social platform.
Market Sentiment
Tuesday morning, while the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) were nearly flat, the Russell 2000 (RUT) rose 1%, signaling a favor toward small caps perceived as undervalued. In addition to meme-stocks, solar stocks have also seen a significant increase.
For example, SunPower (NASDAQ:SPWR) shares rose 64%, and Maxeon Solar Technologies (NASDAQ:MAXN) shares rose 52%.
BitQuant forecasts
The well-known analyst BitQuant predicts that the price of Bitcoin will reach 95,000 dollars in a single move, but the timing remains uncertain. In the meantime, he suggests that investors keep their cool and avoid the market if they are not ready to put up with the volatility
.
Advice for Investors
If you’re a serious investor, it’s essential to consider company fundamentals rather than following the hype of meme-stocks. History teaches us that these speculative surges often end in significant losses. To avoid getting caught up in boom and bust cycles, it’s best to stick to established investment principles and focus on fundamentally sound companies
.
