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Sunday, May 29, 2022

A year after Gamestop, AMC, Robinhood: Meme shares fall

It’s been a little over a year since the meme craze started at GameStop. It has been shaped, to put it mildly, a wild ride for it and other meme stocks like movie theater chain AMC since then.

GameStop and AMC are up sharply from a year ago, but they’re off to a brutal start in 2022. Shares of GameStop are down about 35% in January while AMC is down more than 40%.

These two stocks caught fire in early 2021 as so-called memes — companies with crazy followings among individual investors — took off. Much of their success can be attributed to traders who were fans of the brand, perhaps even more so than the stock fundamentals.

And Robinhood, which went public sometime last year and became a meme stock only after its initial public offering, has fallen as well. Robinhood is down more than 25% this year and is trading at an all-time low.

The dip in Robinhood may, ironically, be cause for celebration for other meme investors: the so-called “apes” who attacked Robinhood last year on Reddit briefly banned the purchase of shares of GameStop and other meme stocks. for. Some argue that this was done to benefit hedge funds that were losing money by betting against these companies.

Renewed conscience?

So what does the big drop in meme stocks say about the broader market? And is prudence back to investing, or will meme stocks make a comeback?

Some experts argue that the rise of meme stocks is a good thing, if for no other reason than it helps democratize the market. More Millennials and Gen Z members are beginning to realize that investing can be a way to build long-term wealth.

That said, many of these young investors have more of a short-term trading mindset, especially regarding stocks like Gamestop and AMC, and cryptocurrencies like bitcoin.

“Last year’s meme stock craze sparked a surge of new, young investors into the stock market,” said Keith Chan, president of Moomoo, a trading app.

“It’s not a passing fad,” he said. “Investors have yet to deal with mem stocks. However, the speculative and volatile nature of this asset class underscores the critical need for a cautious approach when it comes to trading mem shares.

Chan said that in a recent report nearly half of the customers surveyed by the app indicated that meme stock was the “biggest bubble,” more so than even crypto and housing.

earnings matter

Neither GameStop nor AMC are expected to turn a profit this year, nor next year. That’s worrying experts, many of whom urge investors to put their money in big blue chips like Apple and Microsoft.

“Investing in meme stocks involves reckless and unnecessary risk, which puts an investor’s portfolio at risk of potentially catastrophic declines,” David Trainer, CEO of New Constructions, an investment research firm, said in a report.

“We don’t see a problem with paying a premium for a company that’s generating strong profits, but no meme stock is delivering strong profits,” said Trainor, the most popular meme stock, notably GameStop and AMC. “Be unrelated to reality,” adding the assessment.

The massive sell-off in mem stocks in early 2022 could be a sign that investors recognize how bullish last year’s rally was. That said, young merchants are now just flocking to new topics (on memes) instead.

Gen Z investors were more interested in companies like metaverse/gaming leader Roblox, electric truck maker Rivian and mobile payments giant Blockchain in the fourth quarter, according to a look at the top stocks owned by millions of investors in trading technology firm Apex Fintech Solutions in the fourth quarter. (formerly Square) and PayPal — even though these stocks have fallen this year as well.

So how is it possible for young investors to listen to the wisdom of some of their elders and invest in diversified funds that have a basket of stocks instead of going to mem stocks?

“The public is more active in the market than before the pandemic,” analysts at S&P Global Market Intelligence said in a report on Tuesday. “We expect this overall level of retail engagement to remain in place, although sudden rallies in single stock names are now less likely.”

World Nation News Desk
World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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