As AMC and Gamestop stocks plunge, are meme stocks over?

Posted: 26 January 2022 8:00 am
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After meteoric rises in 2021, meme stocks have been cratering. Are they dead, or will they bounce back?

Shares of AMC (AMC) dropped 21% to a low of US$14.23 Monday morning US time and are down roughly 49% this year. Likewise, Gamestop (GME) fell 19% to a low of US$86.29. The stock is down about 44% so far this year.

Losses are mounting for the stocks that saw explosive gains in early 2021 after gaining popularity among retail investors through social media. Many pulled back from the highs but remained well up for the full year.

So is this the end for meme stocks?

How some of the top meme stocks have performed since 2021

It's been nearly a year since the meme stock craze took off.

Let's take a look at how some of the original meme stocks have performed since skyrocketing in 2021.

CompanyPeak market cap 2021Increase 20211-year perf6-month perfYTD performanceMarket cap 24 Jan 2021
Gamestop (GME)US$21.1 billion1,625%+26.59%-47.15%-36.40%US$7.5 billion
AMC (AMC)US$28.5 billion2,695%+280.77%-58.23%-36.54%US$8.6 billion
Bed, Bath & Beyond (BBBY)US$4.3 billion99%-54.04%-52.73%-6.99%US$1.4 billion
BlackBerry (BB)US$8.1 billion114%-55.30%-20.67%-13.98%US$4.6 billion
Nokia (NOK)US$35 billion59%+12.16%-6.85%-13.51%US$31.7 billion
Koss Corp (KOSS)US$520 million1,760%+38.33%-56.59%-29.90%US$75.8 million

These stocks are now well off their Reddit-fueled all-time highs. All told, the value of these stocks are down roughly US$43 billion from the time they individually peaked in 2021.

What happened?

The steep sell-offs aren't being driven by any alarming news from or about these companies, and it isn't just meme stocks that have been hit hard in recent months. Many stocks are coming off their worst week since the pandemic's start in March 2020.

Investors have been fleeing riskier, speculative stocks and pulling their money out of high-growth tech stocks over the last few months as Fed rate hike fears continue to mount. Investors are likely becoming more risk-averse, and highly speculative stocks like meme stocks seem to be losing their luster.

This is very different from a year ago when retail investors were more or less propping up these stocks. Many had been heavily shorted by hedge funds betting they'd fall further and even go out of business.

Can the memes turn around?

While the market seems to be saying the craze is over, with many of these stocks well off their previous highs, meme stocks are difficult to predict. They typically rely on hype to get traders and investors to buy in, and new ones are popping up all the time.

Stocks with high short interest tend to draw a trading frenzy as they're ripe for short squeezes similar to Gamestop's. There's even been talk of meme stocks becoming an asset class of its own.

These stocks remain highly speculative, but meme traders are likely here to stay. It'll be interesting to see if they give up these names in 2022, look elsewhere or dig deeper.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

At the time of publication, Matt Miczulski owned shares of AMC.

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