Many investors were able to make huge profits from the meme stock frenzy in early 2021. Although most meme stocks lost significantly later last year, the frenzy appears to have returned recently, with many stocks skyrocketing amid the economic uncertainties.
Investors’ renewed interest in meme stocks is evident from Roundhill MEME ETF’s 22.7% returns over the past month.
Though a decline in inflation in July from the 40-year high level and strong job growth have restored investors’ confidence in the market, a potential recession and rising tensions over Taiwan will likely bring fundamentally weak meme stocks down to their intrinsic values soon.
Thus, fundamentally weak meme stocks AMC Entertainment Holdings, Inc. (AMC), Peloton Interactive, Inc. (PTON), and Bed Bath & Beyond Inc. (BBBY) are best avoided now.
AMC Entertainment Holdings, Inc. (AMC)
AMC operates as a theatrical exhibition company worldwide. It licenses first-run films from distributors owned by film production companies and independent distributors on a film-by-film and theater-by-theater basis. It also offers food and beverages.
On April 22, 2022, AMC announced an exclusive agreement with Cinionic, the Barco cinema joint venture and global leader in laser-powered cinema solutions, to launch Laser at AMC and significantly upgrade the on-screen presentation at 3,500 auditoriums throughout the U.S., with the full initiative expected to be completed by the end of 2026. This is expected to generate huge demand in the coming months.
For its fiscal 2022 second quarter ended June 30, 2022, AMC’s operating loss came in at $16.10 million, representing a 94.6% rise from the prior-year period. While its adjusted net loss declined 70.1% year-over-year to $102.80 million, its adjusted loss per share fell 71.8% to $0.20. As of June 30, 2022, the company had $965.20 million in cash and cash equivalents, down 39.4% from the end of fiscal 2021.
AMC’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. Its EPS is expected to decline at a rate of 217% per annum over the next five years. The stock has gained 56.7% over the past month and 118.2% over the past three months to close the last trading session at $24.4. It has lost 10.2% year-to-date.
AMC’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an F grade for Stability and a D for Sentiment and Value. Click here for the additional ratings for AMC’s Growth, Quality, and Momentum.
AMC is ranked last of the eight stocks in the F-rated Entertainment - Movies/Studios industry.
Peloton Interactive, Inc. (PTON)
PTON provides interactive fitness products in North America and internationally. The company offers fitness products with streams of live and on-demand classes. In addition, it offers connected fitness subscriptions for users and access to various other services through the Peloton Digital app. It has more than 6.7 million members.
On July 12, PTON announced its exit from all owned-manufacturing operations. The company will expand its current relationship with leading Taiwanese manufacturer Rexon Industrial Corp.
Along with this expanded partnership, PTON will suspend operations at its Tonic Fitness Technology, Inc. facility through the remainder of 2022. This shift might affect the company’s business growth in the near term.
PTON’s revenue for the fiscal 2022 third quarter ended March 31, 2022, decreased 23.6% year-over-year to $964.30 million. Its gross profit declined 58.6% year-over-year to $184.20 million.
The company’s operating expenses increased 100.6% from the year-ago value to $920 million. Its adjusted EBITDA loss amounted to $194 million, compared to a $63.20 million gain reported in the prior-year period.
The company’s net loss and loss per share attributable to common stockholders came in at $757.10 million and $2.27 for the quarter, widening significantly from the year-ago period.
PTON’s loss per share for the fiscal 2022 fourth quarter (ended June 2022) is expected to come in at $0.71. The consensus revenue estimate of $722.19 million for the quarter indicates a 22.9% year-over-year decline. Also, the company has missed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 46.3% over the past month but lost 62.2% year-to-date to close the last trading session at $13.53.
PTON’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
PTON has an F grade for Stability, Sentiment, and Quality and a D for Value. Click here to see additional ratings for PTON’s Growth and Momentum.
PTON is ranked #56 out of 58 stocks in the C-rated Consumer Goods industry.
Bed Bath & Beyond Inc. (BBBY)
BBBY operates a chain of retail stores that sells domestic merchandise, home furnishings, consumables, and various juvenile products internationally. It also operates Decorist, an online interior design platform that provides personalized home design services.
For its fiscal 2022 first quarter ended May 28, 2022, BBBY’s net sales came in at $1.46 billion, representing a 25.1% decline from the prior-year period. The company’s adjusted gross profit came in at $348.15 million, representing a 48.9% year-over-year decline.
Its adjusted pre-tax loss came in at $305.81 million for the quarter, compared to an income of $6.28 million in the year-ago period.
BBBY’s adjusted net loss came in at $225.24 million versus a $4.93 million net income in the prior-year period. Its adjusted loss per share came in at $2.83, compared to a $0.05 EPS in the year-ago period. As of May 28, 2022, the company had $107.54 million in cash and cash equivalents, down 75.5% from the end of fiscal 2021.
BBBY’s EPS is expected to remain negative in fiscal 2023 ending February 28, 2023. The consensus revenue estimate of $6.52 billion for the same fiscal year represents a 17.1% decline from the year-ago period. The stock has gained 156.9% over the past month but lost 11.2% year-to-date to close the last trading session at $12.95.
BBBY’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which equates to Sell in our proprietary rating system.
It has an F grade for Stability and Sentiment and a D for Growth and Momentum. Click here to see the additional ratings for BBBY’s Value and Quality.
BBBY is ranked #59 of 62 stocks in the C-rated Home Improvement & Goods industry.
AMC shares were trading at $23.55 per share on Monday morning, down $0.89 (-3.64%). Year-to-date, AMC has declined -13.42%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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