The meme stock mania reared its head again last month following a tweet from the Roaring Kitty account on X. As a result, shares of GameStop (GME) have more than doubled in the past month, valuing the company at a market cap of $9.7 billion today.
While retail traders may yet once again drive GME shares to all-time highs, it's essential to note that the gaming retailer is a high-risk buy due to its weak fundamentals. For instance, GameStop forecasts fiscal Q1 of 2025 sales to range between $872 million and $892 million, lower than $1.23 billion in the year-ago period. It remains unprofitable and expects to report a net loss of $32 million (at its midpoint forecast) in fiscal Q1.
GME is tracked by only one Wall Street analyst, who has a “strong sell” rating on the stock and a 12-month target price of $7 - much lower than the current trading price around $32.
It's relatively rare for a stock to have a consensus “sell” rating from analysts, but when they do, it's usually worth taking note.
Here are three other “sell”-rated stocks to avoid in June 2024.
1. AMC Entertainment Stock
Similar to GameStop, AMC Entertainment (AMC) was also part of the meme stock rally in 2021, and the recent revival in these names has pushed the shares up by over 54% in the past month.
During the last meme rally in 2021, AMC Entertainment managed to avoid bankruptcy, while this time around, it may look to strengthen its balance sheet by reducing debt. In the last two years, AMC has lowered its debt by $1 billion, but still ended the recent quarter with a debt load of $4.6 billion. It has to repay close to $3 billion in 2026 to creditors and allocate $100 million for quarterly interest payments too.
The recent surge in share prices has allowed it to raise equity capital, amounting to $250 million, which could be used to lower debt. AMC is forecast to report a loss per share of $0.62 this year.
Out of the seven analysts tracking AMC stock, four recommend “hold” and three recommend “strong sell,” for a consensus of “moderate sell.” The average target price for AMC stock is $5.34, about 6.6% higher than the current stock price.
2. Spirit Airlines Stock
Unlike its peers, airline company Spirit Airlines (SAVE) is still unprofitable, and reported an operating loss of $207 million in Q1 of 2024. With $3.3 billion of long-term debt and less than $800 million in cash, Sprit will have to stage a turnaround quickly to service its debt and regain investor confidence.
While the company plans to report cost savings of $100 million in 2024, it is forecast to end the year with losses of $3.89 per share, wider than the prior-year loss of $3.29 per share.
Out of the 11 analysts tracking SAVE stock, six recommend “hold,” one recommends “moderate sell,” and four recommend “strong sell,” for an overall rating of ”moderate sell." The average target price for SAVE is $3.52, nearly 7% below the current price.
3. Beyond Meat Stock
The final “sell”-rated stock on this list is Beyond Meat (BYND), which currently trades 97% below all-time highs. Beyond Meat initially aimed to disrupt the plant-based meat market, but falling profit margins amid rising competition resulted in a steep deterioration of its financials.
In the most recent quarter, Beyond Meat reported sales of $75.6 million, down 18% year over year. Comparatively, its gross profits were quite marginal at $3.7 million.
Further, BYND ended the quarter with a cash balance of $173 million, and used close to $32 million to support its day-to-day operations in the March quarter, which means it has less than 18 months to report a positive free cash flow before running out of cash.
Out of the 13 analysts tracking BYND stock, seven recommend “hold” and six recommend “strong sell,” for an average rating of “moderate sell.”
The average target price for BYND stock is $6.28, nearly 15% lower than the current price.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
