Meme-Trader Enthusiasm: A Closer Look at GameStop and AMC Entertainment
Explore the financial performance of GameStop and AMC Entertainment in light of the meme-trader phenomenon, and the limitations of meme-trader enthusiasm for these companies.
The meme-trader frenzy has undeniably generated a buzz in the stock market, but the financial reports of both GameStop and AMC Entertainment reveal that the hype hasn't translated into substantial profits for these companies. GameStop recently released its earnings report, while AMC Entertainment announced its plans to sell up to 40 million shares at market prices.
Shares of AMC Entertainment (ticker: AMC) hit an all-time closing low on Wednesday and were expected to reach another milestone close on Thursday, with shares experiencing a 5% decline in morning trading. Currently priced at $8.12, this represents a staggering 98% decrease from its peak value of $339 back in June 2021.
In Thursday morning trading, GameStop shares (GME) experienced a 2% decline following the release of their adjusted quarterly net loss report, revealing a $9 million loss. While GameStop also witnessed a surge in share prices due to the influx of retail investors and hedge funds targeting its highly shorted stocks during certain periods in 2021, these gains were relatively short-lived. However, GameStop's stock value remains higher than its pre-meme levels, suggesting a lingering impact from the meme-trader phenomenon.
Both GameStop and AMC Entertainment have garnered a cult-like following on platforms like Reddit and Twitter, where users continue to speculate about potential surges in their respective stocks. While these speculations occasionally come to fruition, they typically have limited impact. It is evident that meme-trader enthusiasm alone is insufficient to drive sustainable financial growth for these companies.
In conclusion, although the meme-trader frenzy has injected excitement and intrigue into the stock market, it is crucial to examine the financial performance of companies like GameStop and AMC Entertainment beyond the hype. While both continue to navigate their challenges, it remains to be seen how their bottom lines will be affected in the long run.
The frenzied rise of AMC as a meme stock cannot be sustained solely by a highly-publicized Taylor Swift concert film or a new popcorn line. Despite the immense interest and investment it has garnered, AMC is projected to suffer a significant loss of $386 million for the full year of 2023, as reported by FactSet. The outlook remains dim, with analysts anticipating losses of $285 million in 2024 and $209 million in 2025.
GameStop, another company swept up in the meme stock phenomenon, faced an uncertain future even before its viral fame. The company had endured executive turnover and grappled with the digital transformation of the gaming industry, which posed an existential threat. Now, GameStop finds itself in a similar predicament once again, having recently experienced a CEO firing. However, there is a silver lining in the improvement of its balance sheet, attributable to at-the-market stock sales following its surge in popularity in 2021.
Wedbush analyst Michael Pachter warns that without a clear strategy to counter dwindling game sales, GameStop could witness escalating losses, beginning with an annual loss of $100 million, then $200 million, $300 million, and beyond, ultimately culminating in its demise within the next decade. Pachter acknowledges that this anticipated downfall lies outside his 12-month time frame used for price targets.
Furthermore, GameStop's venture into the realm of cryptocurrency and nonfungible tokens (NFTs) has failed to deliver promising results. Notably, several executives hired after January 2021 have already departed or been ousted.
Although the influx of cash from stock sales has given both AMC and GameStop a newfound lease on life, it remains uncertain whether these options can validate their current valuations.