Here’s what you can expect from meme stocks in 2024.
It may have been a few years since the meme stock supply frenzy peaked, but we’re still seeing the occasional explosion of meme-like activity in the stock count.
OG AMC Entertainment Holdings Inc. No discussion of meme stocks is complete without AMC.
But while movie theater chains and original meme stocks still attract a lot of attention, they are no longer a good fit for meme stocks, according to Alicia Reese, vice president of equity research at Wedbush. “AMC appears to have lost its meme status, and the stock has fallen back into the ground over the past few months, especially after the APE fold-in and reverse stock split,” she said. “AMC is now trading at a more normalized valuation, despite still being at the high end of its pre-meme historical range.”
AMC’s stock closed Friday’s session at $6.65, a far cry from its all-time high of $393.63 on June 2, 2021, during the meme stock frenzy.
Related: AMC’s stock fell more than 5% after the company completed a $350 million stock offering.
“AMC’s premium valuation here is driven in part by the subsection of shareholders who have remained loyal to the company and gained from the meme phase who have long claimed to be AMC shareholders,” Reese added. “AMC has dissolved all of its remaining shareholders from the Meme Era, leaving only life shareholders along with some institutional shareholders now that valuations have returned to a more normal range.”
Analysts believe AMC will continue to issue pre-authorized shares in 2024 to pay off its high debt balance, as evidenced by the $350 million stock offering completed this week. “The company is trying to right-size its balance sheet while still maintaining a strong relationship with AMC Life Insurance, which supports its stock,” Reese said.
Fellow original meme stock GameStop has also been in the news recently, with the company’s board of directors approving a new investment policy that will allow the company to invest in equity securities, among other investments. The Board of Directors also authorized Chairman and CEO Ryan Cohen to manage the investment portfolio. Wedbush Executive Director Michael Pachter called the new policy “alarming” and “insane.”
“If he can invest in farmland, chicken feed, cryptocurrency, whatever, that’s not in the best interest of shareholders,” he told MarketWatch. “Heaven knows what he will do.”
Related: GameStop’s plan to buy stock with company cash is ‘astounding’ and ‘reckless’, analyst says
As for GameStop, analysts described the video game retailer as a declining business, noting that the company’s third-quarter revenue was $1.078 billion, down from $1.186 billion in the year-ago quarter. “They are shrinking, they are becoming out of date and their path to prosperity is beyond reach,” he added.
The company’s new investment policy may spur more meme-style activity, according to Pachter, who said Cohen’s moves will be closely watched. “He’s going to invest in something, and it’s probably going to be the next meme stock,” the analyst told MarketWatch.
Pachter pointed to Cohen’s decision in 2022 to sell a massive stake in Bed Bath & Beyond Inc., the troubled home goods retailer and sometimes meme stock, just months after acquiring it. That August, Cohen sold his entire stake in Bed Bath & Beyond, five months after acquiring the stake from an activist campaign, earning more than $58 million.
Stocktwits, a social platform for investors and traders, told MarketWatch it has seen a core group of dedicated individual investors sticking with the platform for the likes of AMC and GameStop. “We have seen heightened messaging volume and sentiment on the platform throughout the year, with temporary increases in audience around returns or other events that drive volatility,” Tom Bruni, senior writer at Stocktwits, told MarketWatch.
Related: Chinese small-cap stocks spark meme-like buzz
Bruni owns Vietnamese electric vehicle stock VinFast Auto Ltd. Citing the example of VFS, he said retail traders are still keeping a close eye on high volatility situations.
After a “crazy month” in August, it crashed again. “However, we would like to note that there have been fewer instances of these types of meme stocks occurring this year and they tend to be fairly short-lived,” he added.
“For stocks with ‘meme’ potential in 2024, look to underdeveloped areas of the market that already have a strong community of individual investors around them,” Bruni told MarketWatch. “A few that stand out are electric vehicle stocks, especially startups), solar stocks, or anything related to China.Traders will likely look for stocks where these themes intersect, such as Lucid Group ($LCID), as potential ‘powder keg’ for volatility in 2024.”
Lucid Group Inc. shares of LCID,
The S&P 500 Index is down 30.2% in 2023 compared to the SPX’s 22.9% gain.
One thing is certain: the social media dynamics that created the meme stock phenomenon are not going away. “As the world becomes more digital and young people become more engaged, internet culture will continue to become more prevalent in the marketplace,” Tommy Tranfo, head of community at Stocktwits, told MarketWatch. “Cryptocurrency markets are an area where we expect to see a significant concentration of this activity, especially in the context of a cryptocurrency bull market, which is likely to bring a wave of new market participants who will lean towards internet cultural demonstrations.”
Related: This EV company has a larger market capitalization than Ford or GM. But you may not have heard of it.
“New cryptocurrency meme communities like $BONK (a dog-themed coin on the Solana blockchain) are a clear example of this craze already happening,” he added.
