Good luck telling investors there’s 90% downside in AMC stock — which made them a fortune compared to the S&P 500’s gain. But that’s analysts’ task when covering so-called meme stocks.
Analysts think the major stocks being pushed up in online forums, namely the ringleaders AMC Entertainment (AMC), GameStop (GME) and BlackBerry (BB), are all grossly overvalued, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
AMC Not Alone In Analysts’ Sights
Dim analyst outlooks on these stocks aren’t a surprise. Investors talking up stocks on online forums like Reddit focus on companies they have affinity for. Many are left for dead, or shorted by larger investors. But analysts’ warnings are so dire, it’s prudent to pay attention.
“Rallies like AMC, GME, show that retail investors are looking for opportunities in the stock market,” said Hossein Azari, CEO of market data analysis firm, cmorq. They “are willing to take risks, and more importantly have the power and capital to really move the market.”
Meme Darling AMC Stock: 90% Downside?
AMC stock analysts couldn’t be much more bearish on the stock. But don’t try telling that to AMC stock owners.
Shares of the struggling movie chain are up 2,323% this year. That’s a larger gain than just about any other major stock. Amazingly, the stock has nudged beleaguered game seller GameStop aside as the lead actor in the meme stock phenomenon. AMC is also making billions for its top investors and executives.
But the seven analysts still covering the stock are essentially saying it’s curtains for AMC. Analysts hold an average 12-month price target on the stock, now more valuable than about half the S&P 500, of just 5.11 a share. That’s a staggering 90% implied downside from AMC stock’s 51.34 closing price on Thursday.
And that masks some even more negative targets. Influential analyst David Trainer of New Constructs thinks the stock is worthless. AMC still owes more than $5 billion in long-term debt.
Investors got a taste of selling Thursday. AMC stock fell 18% following another multi-million dollar stock offering.
Analysts also think the company will lose money in at least each of the next three years. Forecasts call for an adjusted loss of $1.4 billion this year, $428 million next year and $271 million in 2023.
90% Downside In GameStop?
GameStop lost its leading mojo a bit with meme-stock investors. The stock is also an example of how you can lose lots of money on these stocks. It’s down half from its all-time closing high of 483. And analysts still think the stock is living on borrowed time.
Analysts predict GameStop stock will only be worth 26 a share in 12 months. If that’s right, it would signal a nearly 90% drop from Thursday’s close of 258.18. And as with AMC, analysts are bearish on the fundamentals, too. GameStop is expected to lose another $46 million in the current fiscal year ending in January, after losing $139 million in the most recent year. And analysts see the company losing another $12 million in fiscal 2023.
And yet, shares of GameStop are up 59% in the past month. Normally, that would be an untouchable run. In a world where AMC stock is up 429% in a month, GameStop suddenly looks like it’s a supporting actor. But analysts are still warning downside looms.
Some Forecasts On Meme Aren’t As Onerous
Analysts aren’t quite as negative on all meme stocks — including some of the more recent stocks to join in.
Fallen mobile connectivity company, BlackBerry, is one of the newest playthings with meme investors. They’ve pushed the stock up nearly 140% this year to 15.88 a share. And yet, analysts think BlackBerry stock should only be worth about half that, 8, in 12 months.
To be sure, it can be profitable to stray from the establishment on stocks — and find true leaders like the ones on Leaderboard. The market also give you clues which stocks to own and when. Also, these stock rallies could turn into self-fulfilling prophesies if the companies raise more cash. Plus, analysts get plenty of calls wrong.
But given how dire the analysts’ outlooks are, it’s best to make sure you have sound investing rules. And make sure you know what to do if the crowd is wrong.
What Analysts Think Of Major Meme Stocks
12-month price targets signal downside
|Company||Symbol||Thurs. close||12-month target price||Stock YTD % ch.||Implied downside % to target||Sector|
|AMC Entertainment Holdings||(AMC)||51.34||5.11||2,321.7%||-90.1%||Communication Services|
|Bed Bath & Beyond||(BBBY)||31.90||25.85||79.6%||-19.0%||Consumer Discretionary|
|Beyond Meat||(BYND)||143.06||116.20||14.4%||-18.8%||Consumer Staples|
|Workhorse Group||(WKHS)||14.77||13.70||-25.3%||-7.2%||Consumer Discretionary|
Source: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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