Amid the market uncertainty surrounded by high inflation, aggressive interest rate hikes and economic downturn, the meme stock has bounced back this year. But given the macroeconomic and geopolitical headwinds, you may want to avoid fundamentally weak meme stocks AMC Entertainment ( AMC ), Peloton Interactive ( PTON ), and Bed Bath & Beyond ( BBBY ). Read more….
Many investors were able to make big profits from the meme stock frenzy in early 2021. Although most meme stocks lost significantly later last year, the madness seems to have returned recently, with many stocks soaring amid the economic uncertainty.
Investors’ renewed interest in meme stocks is evident from the Roundhill MEME ETF’s 22.7% return in the past month.
Although a slowdown in July inflation from 40-year highs and strong job growth have restored investor confidence in the market, a potential recession and rising tensions over Taiwan are likely to bring fundamentally weak meme stocks down to their intrinsic values soon.
Thus, fundamentally weak meme stocks AMC Entertainment Holdings, Inc. (AMC), Peloton Interactive, Inc. (PTON), and Bed Bath & Beyond Inc. (BBBY) is best avoided now.
AMC Entertainment Holdings, Inc. (AMC)
AMC operates as a theatrical exhibition company worldwide. It licenses first-run films from distributors owned by film production companies and independent distributors on a film-by-film and theater-by-theater basis. It also offers food and drinks.
On April 22, 2022, AMC announced an exclusive agreement with Cinionic, the Barco cinema joint venture and global leader in laser-powered cinema solutions, to launch Laser on AMC and significantly upgrade the screen presentation at 3,500 auditoriums across the US, with the entire initiative expected to be completed by the end of 2026. This is expected to generate high demand in the coming months.
For the second quarter of fiscal 2022 ended June 30, 2022, AMC’s operating loss came in at $16.10 million, representing a 94.6% increase from the prior year. While its adjusted net loss fell 70.1% year-over-year to $102.80 million, its adjusted loss per share fell 71.8% to $0.20. As of June 30, 2022, the company had $965.20 million in cash and cash equivalents, a decrease of 39.4% from the end of fiscal 2021.
AMC’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. EPS is expected to decline at a rate of 217% per year over the next five years. The stock has risen 56.7% in the past month and 118.2% over the past three months to close last trade at $24.4. It has lost 10.2% so far this year.
AMCs POWR Ratings This reflects the gloomy outlook. The share has an overall D rating, which corresponds to Sell in our proprietary rating system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted optimally.
It has an F grade for stability and a D for sentiment and value. click here for the additional ratings for AMC’s growth, quality and momentum.
AMC is ranked last of the eight shares in F-rated Entertainment – Movies/Studios industry.
Peloton Interactive, Inc. (PTON)
PTON offers interactive training products in North America and internationally. The company offers fitness products with streams of live and on-demand classes. In addition, it offers connected training subscriptions for users and access to various other services through the Peloton Digital app. It has more than 6.7 million members.
On 12 July, PTON announced its departure from all owned production operations. The company will expand its current relationship with leading Taiwanese manufacturer Rexon Industrial Corp.
Along with this expanded partnership, PTON will suspend operations at the Tonic Fitness Technology, Inc. facility through the remainder of 2022. This shift may impact the company’s business growth in the short term.
PTON’s revenue for the third quarter of 2022 ended March 31, 2022, fell 23.6% year-over-year to $964.30 million. Gross profit fell 58.6% year over year to $184.20 million.
The company’s operating expenses increased by 100.6% from the value of the previous year to 920 million dollars. Its adjusted EBITDA loss amounted to $194 million, compared with a $63.20 million profit reported in the same period a year earlier.
The company’s net loss and loss per share attributable to common shareholders came in at $757.10 million and $2.27 for the quarter, a significant increase from the same period last year.
PTON’s loss per share for the fourth quarter of 2022 (ended June 2022) is expected to come in at $0.71. The consensus revenue estimate of $722.19 million for the quarter indicates a decline of 22.9% year over year. The company has also missed consensus EPS estimates in each of the last four quarters.
The stock has gained 46.3% in the past month, but lost 62.2% year-to-date to close last trade at $13.53.
PTON’s weak fundamentals are reflected in its POWR ratings. The share has an overall F-rating, which corresponds to a strong sell in our proprietary rating system.
PTON has an F grade for stability, sentiment and quality and a D for value. click here to see more reviews for PTON’s Growth and Momentum.
PTON is ranked #56 out of 58 shares in C-rated Consumer goods industry.
Bed Bath & Beyond Inc. (BBBY)
BBBY operates a chain of stores selling domestic goods, furniture, consumer goods and various youth products internationally. It also operates Decorist, an online interior design platform that offers personalized home design services.
For the first quarter of fiscal 2022 ended May 28, 2022, BBBY’s net sales came in at $1.46 billion, representing a 25.1% year-over-year decrease. The company’s adjusted gross profit came in at $348.15 million, representing a 48.9% year-over-year decline.
Its adjusted pretax loss came in at $305.81 million for the quarter, compared with revenue of $6.28 million in the year-ago period.
BBBY’s adjusted net loss came in at $225.24 million against net income of $4.93 million last year. Its adjusted loss per share came in at $2.83, compared to EPS of $0.05 in the year-ago period. As of May 28, 2022, the company had $107.54 million in cash and cash equivalents, a 75.5% decrease from the end of fiscal 2021.
BBBY’s EPS is expected to remain negative in fiscal 2023 ending February 28, 2023. The consensus revenue estimate of $6.52 billion for the same fiscal year represents a 17.1% decline from the prior-year period. The stock has gained 156.9% in the past month, but lost 11.2% year-to-date to end the last trade at $12.95.
BBBY’s POWR ratings reflect this bleak outlook. The share has an overall rating of D, which corresponds to Sell in our proprietary rating system.
It has an F grade for stability and sentiment and a D for growth and momentum. click here to see the additional ratings for BBBY’s value and quality.
BBBY is ranked #59 out of 62 stocks in C-rated Home improvement and goods industry.
AMC shares were trading at $23.55 per share Monday morning, down $0.89 (-3.64%). So far this year, AMC has fallen -13.42%, compared to a rise of -9.56% in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She is passionate about educating investors so they can find success in the stock market.
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