Meme stocks gained popularity last year, with several fundamentally weak stocks rising to unsustainable prices based on retail investors’ bets against short-selling hedge funds. Prominent meme stocks GameStop (GME), BlackBerry (BB), and Virgin Galactic (SPCE) have lost significantly from the highs they hit last year. Given the overall risk-off environment, these fundamentally weak stocks could lose further. So, if you are still holding these stocks, it could be wise to sell them immediately. Let’s discuss.
Most meme stocks that took Wall Street by storm at the beginning of last year slumped to record lows this year, wiping out almost all of their gains resulting from the short squeeze rallies triggered by retail investors’ bets against short-selling hedge funds.
The members of social media forums, such as Reddit’s Wall Street Bets, got together to bet against the hedge funds on stocks possessing weak fundamentals. The short squeeze helped retail investors gain significantly.
After a lull, the meme stock mania was back in action, with Bed Bath & Beyond Inc. (BBBY) skyrocketing last month.
However, with inflation remaining near its highest level in more than 40 years and the Fed reiterating its stance of raising interest aggressively until inflation falls to the desired level, the stock market will likely remain under pressure in the upcoming months.
Given this backdrop, it could be wise to sell shares of fundamentally weak meme stocks GameStop Corp. (GME), BlackBerry Limited (BB), and Virgin Galactic Holdings, Inc. (SPCE) before they lose further.
GameStop Corp. (GME)
GME provides games and entertainment products through its e-commerce properties and various stores in the United States, Canada, Australia, and Europe. It sells new and pre-owned video game platforms and software, accessories, and in-game digital currency. It has received 375 in the WSBs over the past 24 hours.
GME’s gross profit 9.6% year-over-year declined to $298.50 million in the first quarter ended April 30, 2022. The company’s selling, general and administrative expenses increased 22.1% year-over-year to $452.20 million. Its adjusted operating loss widened 611.6% year-over-year to $153.70 million. In addition, its adjusted net loss widened 437% year-over-year to $157.90 million. Also, its adjusted loss per share widened 362.2% year-over-year to $2.08.
Analysts expect GME’s EPS to remain negative in the quarter that ended July 31, 2022. It failed to surpass Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 38.4% to close the last trading session at $31.55.
GME’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an F grade for Growth, Value, Stability, and Sentiment and a D for Momentum. It is ranked last out of 46 stocks in the Specialty Retailers industry. Click here to see the rating of GME for Quality.
BlackBerry Limited (BB)
Headquartered in Waterloo, Canada, BB provides intelligent security software and services to enterprises and governments worldwide. It offers intelligent security software and services to enterprises and governments worldwide. The company operates through three segments: Cybersecurity, IoT, Licensing, and Other. It has received 33 mentions in the WSBs over the past 24 hours.
For the fiscal first quarter that ended May 31, 2022, BB’s revenue declined 3.4% year-over-year to $168 million. The company’s operating expenses increased 63.4% year-over-year to $281 million. Its net adjusted loss widened 14.8% year-over-year to $31 million. Also, its adjusted EBITDA loss widened 250% year-over-year to $21 million.
For the quarter ending August 31, 2022, BB’s EPS is expected to remain negative. Its revenue is expected to decline 5.8% year-over-year to $164.73 million. Over the past year, the stock has declined 45.9% to close the last trading session at $6.11.
BB’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to a Sell in our proprietary rating system.
It has a D grade for Momentum and Stability. Within the Technology – Communication/Networking industry, it is ranked #47 out of 52 stocks. Click here to see BB’s other ratings for Growth, Value, Sentiment, and Quality.
Virgin Galactic Holdings, Inc. (SPCE)
Headquartered in Las Cruces, New Mexico, SPCE is an aerospace company focused on developing, manufacturing, and operating spaceships and related technologies to conduct commercial human spaceflight and fly commercial research and development payloads into space. It has received one mention in the WSBs over the past 24 hours.
SPCE’s revenue declined 37.4% year-over-year to $357K for the second quarter that ended June 30, 2022. The company’s operating expenses increased 47.8% year-over-year to $110.07 million. Its operating loss widened 48.4% year-over-year to $109.72 million. Also, its net loss widened 17.7% year-over-year to $110.72 million.
Analysts expect SPCE’s EPS for the quarter that ended September 30, 2022, to remain negative. Its revenue for the quarter ended September 30, 2022, is expected to decline 96.3% year-over-year to $94.62K. Over the past year, the stock has declined 77% to close the last trading session at $5.98.
SPCE’s weak prospects are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Growth, Stability, and Sentiment and a D for Value and Quality. It is ranked last out of 31 stocks in the D-rated Airlines industry. Click here to see SPCE’s rating for Momentum.
GME shares were trading at $30.40 per share on Tuesday morning, down $1.15 (-3.65%). Year-to-date, GME has declined -18.05%, versus a -14.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.