AMC Entertainment Holdings (GameStop Corp.) were two of the most popular meme stocks in 2017, with their prices driving up by retail buyers
GameStop’s 2021 peak of $483 is still miles away, and shares in AMC Entertainment are also well below the highs at $72.62.
Shares of “meme stocks” GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC) are down roughly 36% and 44% year to date after a brutal few weeks in the markets.
While the stocks saw a huge bounce on Friday, an analyst says the sell-off witnessed since the market frenzy of 2021 isn’t over for these stocks.
He sees more pain as investors pivot to profitable companies or invest in other niches such as metaverse and NFTs.
No profits and “untethered from reality”
In 2021, meme stocks burst onto the market. They soared to great heights along with Bitcoin and other cryptocurrency. Analysts predict that the stock market will continue to plummet as crypto continues to tank.
David Trainer, CEO of New Constructs Investment Research Firm says AMC and GameStop are looking to increase their sales, but the companies will not be profitable in the next two-years.
Trainer explains that investors may look elsewhere for profitable deals, and steer clear of stocks that pose a risk to their portfolios’ unnecessarily high risk of catastrophic declines.
According to the analyst, while investors might want to look at the valuation of companies they invest in versus their profitability, the metric doesn’t really apply to most meme stocks.
He points out that investors will not hesitate to pay a premium for investment in companies with high profits. Pointing out GameStop and AMC Entertainment as two of the most popular, he said the two have valuations that “remain untethered from reality.”
“Meme stocks like GameStop and AMC Entertainment remain dangerously overvalued and don’t generate anywhere near the profits necessary to justify their current valuations,” he added.
Potential investment trends that could see more inflows are metaverse and NFT-linked companies.
Wall Street targets AMC stocks and GME stocks
GameStop stock closed Friday at $97.91. That’s an increase of 4.8%. AMC shares traded higher by 3.7% to $15.06. While positive on the day, a look at the monthly logs shows the extent of the stocks’ declines.
MarketWatch data shows that GME has fallen 69% over the past 12 months. AMC, however, is down sharply year-to-date at -44%. This will reduce annual gains to only 13%. Over the past 30 days, GME prices are down nearly 37% as AMC’s have shed nearly 48%.
Wall Street’s average income is $1,057 price targetAMC Entertainment is charged $8.17. This represents a 45.75% drop in value from the current levels.
TipRanks are also available shows that 4 analysts have an average price target of $34.00 for GME, suggesting an expected 65.27% drawdown from Friday’s close of $97.91.