Meme mania seems to have returned to the spotlight in October. Bullish momentum around “old school” meme stocks is back, as retail investors flood the main online forums on Reddit and elsewhere to discuss the trade (or HODL) opportunities.
Classic meme names such as GameStop (GME) - Get GameStop Corp. Class A Report, BlackBerry (BB) - Get BlackBerry Limited Report, Clover Health (CLOV) - Get Clover Health Investments Corp Class A Report and Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report have all risen since the past month. AMC stock (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report has benefited too: shares climbed around $5 per share in the past five days alone.
Today, we present reasons to be optimistic or pessimistic about AMC in the wake of recent meme activity.
(Read more from Wall Street Memes: SmileDirectClub Stock: Will It Surge After Earnings?)
On the surface, meme mania revival is good for AMC stock for obvious reasons. Alongside GME, AMC is considered the ultimate classic meme stock. Its most enthusiastic shareholder base, i.e. the self-proclaimed apes, rely on rising popularity leading to a bullish spark that triggers FOMO and, eventually, a buying spree that sends share price higher.
Something like it has not happened since late May and early July, and late January before that – when “diamond hands” bought into the short squeeze thesis and raked in impressive gains. Since then, AMC has struggled to climb much on the back of sky-high valuations that seem disconnected from the company’s fundamentals.
On the other hand, the emergence of other meme stories can be a drag to AMC if they shift the apes’ focus. This was the argument made a few months ago by Macquarie analyst Chad Beynon, during an interview with famed trader Matt Kohrs. One of the main reasons for his bearish stance on shares of the movie theater company was the emergence of other meme stocks stealing AMC’s thunder.
AMC shares have struggled since reaching a three-month peak of $50 in mid-September. The lack of major catalysts cooled enthusiasm across online discussion boards. See the two charts below showing AMC's exposure on Reddit's Wallstreetbets forum (left) and elsewhere (right) over the past 6 months.
The SEC report on GME’s trading activity in January may have also discouraged some meme traders. The report concluded that the share price surge was caused mainly by massive buying volume, not by shorts covering their positions. Keep in mind that forcing the latter has been a key philosophical pillar of the meme movement.
(Read more from Wall Street Memes: Avis Stock To The Moon And Back: What To Do Next)
Meme mania might be back. Is this good for AMC stock, as “apes” rally around the cause, or not so much, since other meme targets could steal AMC’s thunder?
Get more expert analysis on "stonks"
It’s never too early (or late) to start growing your investment portfolio. Join the Real Money community for just $7.50/month and unlock expert advice from our team of 30+ investing pros.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)