GameStop and AMC Extend Slump as Meme-Fueled Rally Unravels

GameStop and AMC Extend Slump as Meme-Fueled Rally Unravels
A GameStop store in New York.

GameStop Corp. and AMC Entertainment Holdings Inc. are slumping for a second day, as the meme-stock frenzy that gripped markets earlier this week fades.

GameStop fell as much as 20% Thursday, and AMC was down by 12%. Meme traders had bid up the stocks for the first two days of the week, before the momentum faltered on Wednesday and the ensuing tumbles erased a large swath of the $11 billion of market value they’d gained.

“In stocks like this that there’s no fundamental underpinning, they can’t stay elevated without people constantly coming in,” said Tuttle Capital Management Chief Executive Officer Matthew Tuttle.

GameStop's Long Meme-Stock Journey | Shares remained below 2021 peak despite recent volatility

The volatility recalls the heyday of meme stocks in early 2021, when retail traders latched onto the video game retailer and beleaguered movie theater chain and sent both stocks to record highs. Keith Gill, operating under the online moniker “Roaring Kitty,” shot to fame in 2021 as he rallied traders on Reddit around GameStop. A Sunday post from his account on X helped launch the latest bout of volatility.

Read more: What to Know About the Fading Meme Stock Sequel: QuickTake

This week’s swings jarred short sellers, but have been fairly muted compared to the fireworks of 2021, when GameStop soared by more than 1,600% that January. It has yet to reclaim the high watermark shares set then.

“Coming out of Covid, all you heard was HODL, diamond hands. I think that’s all gone,” Tuttle said. “They’re smarter, they know how to trade this stuff.”

The video game seller isn’t expected to turn a profit until the holiday quarter, according to analyst estimates, and now trades at more than 1,200-times its expected 12-month forward earnings — the highest among US-listed stocks with market capitalizations above a billion dollars as of Wednesday’s close, according to data compiled by Bloomberg.

AMC has cashed-in on the surge, announcing it had completed a previously announced at-the-market equity offering and that it had reached a private deal to swap shares to reduce its debt.

Read More: Will GameStop Cash In on the Meme Stock Rally?: ECM Watch

“Valuations remain artificially inflated, but these sharp one-day moves stand as a reminder of the dangers of engaging in speculative trades,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.


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