GameStop, AMC, AITX, WISH, Clover stocks could be in for a ride

The meme coin craze that happened in 2021 ended as was expected. Most stocks that surged at the time nosedived, with Bed Bath and Beyond and Lordstown Motors filing for bankruptcy. 

Meme stocks have plunged hard

GameStop (GME) stock price has crashed by over 87% from its highest point in 2021, lowering its market cap from a peak of $96 billion to $4.6 billion. The shares are now hovering near the lowest level since February 2021.

Similarly, AMC Entertainment (AMC) has shed billions of dollars in value and diluted its investors. Its market cap has crashed from $36 billion to less than $2 billion while the number of outstanding shares has surged to over 200 million. Before the meme stock craze, the cinema chain had 19.5 million outstanding shares.

ContextLogic (WISH) stock has done worse than GME and AMC. Its stock peaked at $989 and has now plunged to $5.38. The company has lost traction among customers who have now turned to Temu, which is owned by PDD Holdings. WISH’s annual revenue dropped from over $2.54 billion in 2020 to just $571 million in 2022. 

AITX stock has also moved to the abyss. After peaking at $0.30 in 2021, it has now plunged to a record low of $0.0036. Like AMC, it is also a dilution machine that has increased its outstanding shares from 3.2 billion in 2021 to over 7 billion today.

Most meme stocks have had a similar path. For example, Clover Health Investments (CLOV) stock has crashed to $0.99 from its 2021 peak of $29. Zmedica, Sundial Growers, and Blackberry have also plunged.

GME vs AMC vs GME vs Clover stocks

Federal Reserve rate cuts ahead

Fundamentally, these companies are in a lot of trouble, especially as interest rates remains at the highest point in over 22 years. They are also facing huge challenges as their growth slows. For example, while AMC had a strong third quarter, it is unclear whether it will continue doing well in the coming months as blockbuster movies struggle.

Financial conditions are also vastly different today than they were in 2021. For one, Washington is not providing the free money it did during the pandemic. Also, inflation remains substantially higher than it was during the pandemic and people are now back to the office.

However, activities of the Federal Reserve could see these stocks see volatility in the coming months. Most economists believe that the Fed will slash interest rates in June 2024. In a statement, Bill Ackman, who has been quite accurate recently, said that he believes that the bank will cut rates in Q1’24.

A rate cut or a signal of easing could trigger more demand for these meme stocks in 2024. Besides, their stock prices have crashed by more than 80% from the highest point during the pandemic.

The argument is that if these companies survived when rates were at a 22-year high, they would also do well if rates started to fall. We have already seen this surge in the crypto industry, where most coins have risen.

However, these companies are still extremely risky because of their weak revenue growth, high debt burden, and challenges in their businesses.