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3 Experts Weigh In on the Meme-Stock Meltdown. Are They Right?

With meme stocks melting down, Wall Street is debating whether we've come to the end of the meme craze. Here are three expert opinions.

What a difference a year makes. January 2021 was the beginning of meme-stock mania, when Reddit investors helped push heavily shorted shares higher.

But now meme-stock “blue chips” like GameStop  (GME) - Get GameStop Corp. Class A Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report are sharply declining from recent peaks. And negative sentiment has been spreading on Wall Street.

However, meme-mania sentiment remains high on Reddit, even with recent tumbles. Let's list three recent opinions coming from Wall Street regarding a possible meme-stock meltdown.

Figure 1: 3 Experts Weigh In on the Meme-Stock Meltdown. Are They Right?

Figure 1: 3 Experts Weigh In on the Meme-Stock Meltdown. Are They Right?

(Read more from Wall Street Memes: Jim Cramer On GameStop And AMC Stock: "Buy What You Know")

Meme-Stock Mania Is Not a Revolution

The Wall Street Journal's Spencer Jakab, author of The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors, recently said that meme stocks are a fantastic case study in behavioral finance. But that they're nothing more than that.

Jakab said that investors have always been fleeced by Wall Street. At the end of the day, Wall Street always makes money when small investors usually don't.

Finally, he said that he finds it strange and kind of sad that Reddit communities continue to support meme stocks, believing that phantom shares are hurting the performance of these stocks and that the mother of all short squeezes will still occur. Meanwhile, none of this ever occurs, just as the end of the world doesn't ever occur, either.

Meme Craze Benefits GameStop and AMC

A few weeks ago, Titan Global Capital Management Co-Founder and CEO Clayton Gardner gave an interview to Yahoo Finance in which he stated his opinion regarding meme stocks.

First, he believes that the monetary stimulus brought on by the pandemic has served as a catalyst to motivate new investors to join investment platforms that have a casino-gambling feel. As such, he sees meme stocks as major beneficiaries of these capital flows.

Regarding the current meltdown in meme stocks, Gardner said that, even as the hysteria period passes, companies like GameStop and AMC can truly benefit from rising share prices by issuing more shares at higher prices and raising more capital to reinvest.

Titan's CEO further said that he believes it's worth thinking as an investor about things like GameStop raising capital to become the "Amazon  (AMZN) - Get Amazon.com, Inc. Report of games" — even though it sounds far-fetched — rather than depreciating the meme craze.

Retail Investors Are Being Taken More Seriously

Anthony Denier, CEO of trading platform Webull, said that he sees the involvement of retail investors in Reddit's main forums as a positive thing that leads to new ideas and serves as an alternative to traditional venues of discussion.

However, regarding the future of meme stocks, Denier sees things differently to the previous year. Given the uncertainties in the financial markets at the beginning of this year and the lack of upward trends, there's been less excitement about stocks on Reddit threads. In part, that's because people are running out of stimulus money.

He concluded that many investors who sold their positions ahead of the meltdown did well, but many who bought during the climax lost a lot of money.

The Bottom Line

In times of uncertainty and fear, it's natural to avoid aggressive and risky investments. This is exactly what has happened with meme stocks lately.

The current economic scenario has been unfavorable not only for meme stocks, but also for speculative assets such as cryptocurrencies and growth and tech stocks — which are more sensitive to interest rate increases.

In addition, the tailwinds brought on by the pandemic and the end of stimulus money shouldn't blow again in favor of meme stocks.

However, meme stocks often defy investment nature. As long as the Reddit threads about meme stocks remain active, the meme craze will live on. 

(Read more from Wall Street Memes: Nokia Stock: Could The Meme Saga Repeat In 2022?)

(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)