Meme stock rallies are back. Some stocks have catapulted without any catalysts or meaningful developments. Despite the obvious bubble, investors continue to pour into these meme stocks, hoping that other people will bid up prices even higher.
While meme stock rallies can feel euphoric for people who got in early, we all know how they end at this point. Many meme stocks lose half of their value within a few months, while other stocks are more than 90% down from their all-time highs.
However, the phrase “meme stock” has started to include legitimate companies. Just because a company is outperforming the stock market by a wide margin doesn’t necessarily make it a meme stock. The term has become more broad to include more companies, but the original meme stocks still remain troubling.
The high of seeing your meme stock trade gaining momentum won’t mean much in the long run if you see your returns evaporate. These are some of the meme stocks to sell before they implode.
Gamestop (GME)
Gamestop (NYSE:GME) is the original meme stock that started it all. Although shares are well-removed from their 2021 highs, the stock has shown signs of life with a 45% year-to-date gain. Although the company has plenty of fans due to nostalgia and recent stock gains, its business is flailing in the wind. Net sales dipped by 29% YOY in Q1 2024 to reach $882 million.
While the company reported declining revenue, it’s worse due to a $32.3 million net loss the company incurred in the quarter. While the net loss was worse in Q1 2023, it’s not a good sign that Gamestop is burning through cash while seeing its underlying business shrink.
Gamestop closed the quarter with $1.083 billion in cash compared to $848.3 million in current liabilities. Low interest rates on the company’s debt will minimize costs, but Gamestop still looks like a company on life support. The retailer has closed 54 stores year-to-date which is higher than the number of stores it closed last year.
AMC (AMC)
AMC (NYSE:AMC) is another original meme stock, but it hasn’t had the same luck as Gamestop to start the year. Shares are down by 15% year-to-date but enjoyed a brief spike after GME stock got brought back into the spotlight. AMC is also more than 98% lower than its 5-year high.
People aren’t going to the movie theaters as they did in the past, and that’s likely not going to change. Streaming platforms make it more convenient and affordable to watch movies. Why spend money on movie tickets, gas, parking, overpriced food, and other expenses when you can wait for the same movie to show up on your streaming platform a few months later?
The greater access to old and new entertainment makes movies less relevant. Q1 2024 results highlight this trend, as revenue dipped slightly YOY. The company also reported a $163.5 million net loss which is somehow an improvement from Q1 2023. AMC only has $624.2 million left as cash and cash equivalents, so it doesn’t have much wiggle room.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) is one of the many hydrogen and EV stocks that rose to prominence in 2021 only to crash hard a year later. While a small number of these stocks have recovered since then, Plug Power is among hydrogen and EV stocks that aren’t anywhere close to its all-time high. The company created the first commercially viable market for hydrogen fuel cell technology, but that hasn’t resulted in good returns for investors.
Shares are down by more than 96% from their all-time high and have registered a 46% year-to-date loss. Stock gains aren’t the only thing lacking with this company. Revenue dropped by 43% YOY in the first quarter, totaling $120.3 million. Plug Power also concluded the quarter with a $296 million net loss.
Revenue and net income are both declining as the company continues to burn through cash. This company had its day as a meme stock, but there’s no reason to buy shares at this time.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Marc Guberti did not have (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.comPublishing Guidelines.