Meme stocks have been a dominant retail investor phenomenon polarizing the markets in 2021. And love them or hate them, meme stocks persist. Pundits have long speculated that the bottom will fall out of the overall movement. But that hasn’t happened yet — and it simply may never happen.
The truth is that demand buoys markets. So, as long as collective retail interest persists, this phenomenon will stick around.
And after all, collective retail investor action is actually not that different from institutional investor demand. Yes, Wall Street often applies more analytical rigor in their decision-making. And yes, Wall Street tends to back safer stocks.
But it’s the capital behind both retail and institutional investment that truly dictates the course of the markets. As long as retail investments in meme stocks result in massive capital being pumped into those names, the power remains real.
That said, there are meme stocks that most folks agree will fail sooner or later. As the tide slowly turns on their prospects, capital will flee. So, let’s take a look at some of the biggest names to avoid or move out of before it’s too late.
- GameStop (NYSE:GME)
- AMC (NYSE:AMC)
- Clover Health (NASDAQ:CLOV)
- Canoo (NASDAQ:GOEV)
- Vinco Ventures (NASDAQ:BBIG)
- Tilray (NASDAQ:TLRY)
- Ocugen (NASDAQ:OCGN)
Meme Stocks to Sell: GameStop (GME)
GameStop has been by far one of the biggest beneficiaries of the movement among meme stocks. It has gone from failing brick-and-mortar game rental company to a market antihero. There is no disputing that GME stock has a phenomenal story underpinning its rise to fame.
Ryan Cohen is a big part of that narrative. He’s a pretty phenomenal story as well. And now he has control of the reins at GameStop. No matter what you think about GME, you have to pause and think about what he’s done. But despite how great his story is, that shouldn’t cloud your judgment.
The fact is that Cohen’s digital transformation plans for reinvigorating GameStop haven’t come to much. What investors are left with is a company that is forecast to contract in 2022. Consensus expectations are that GameStop will record approximately $6 billion in revenue this year, but a slightly smaller $5.78 billion in 2022.
I frankly don’t think that retail investors are going to continue to be inspired as more of them come to that realization. By the way, GameStop recorded $8.29 billion in revenue for 2019. Its shares traded at $5 then, so why should GME remain artificially higher while revenues creep lower?
Even with full capacity at its theaters and a record-setting blockbuster sending customers through its doors, AMC is still bound to fail. That’s why it makes sense to sell AMC stock before it loses momentum.
Pundits will push the return to normalcy narrative to make others believe AMC is turning around. But that’s a narrative to avoid. Yes, if you look at headlines touting Spider-Man: No Way Home and its record box office haul, it could be tempting. But that’s why it makes sense to look at the bigger picture. A turnaround remains unlikely and the pandemic has changed perspective.
In the third quarter, AMC recorded $763.2 million in revenue. That figure was several-fold more than the $119.5 million it saw in Q3 2020. But that’s simply a pandemic bump, nothing else.
AMC is likely to see approximately $4.7 billion in revenue in 2022. That will be a massive spike from the $2.5 billion it should record in 2021. At the same time, though, that’s less than the $5.47 billion it recorded in 2019 revenue.
This pick of the meme stocks is very similar to GameStop in this way — AMC stock traded at around $10 back in 2019 and should ultimately trade there again.
Meme Stocks to Sell: Clover Health (CLOV)
Next up on this list of meme stocks, there’s a reasonable argument to be made that Clover Health could fall even farther than it already has. And make no mistake, it has witnessed a precipitous decline since early September, dropping more than 50% of its value.
That leaves it trading at under $5 currently. The troubling news for meme-stock traders, though, is that CLOV stock only has 8.92% short interest right now, according to Barron’s. That indicates that a short squeeze isn’t very likely. So, the only other way for prices to appreciate is based on a fundamental-based surge in demand.
The problem is that Clover Health has significant operational issues. For instance, its acceleration of losses has been very rapid. The company incurred a $25.08 million operational loss through the first nine months of 2020.
When CLOV stock came public, it did so through a special purpose acquisition company (SPAC) and there was a lot of anticipation surrounding the firm. Suffice it to say, investors were willing to give the growth company the benefit of the doubt over the $25 million loss then.
Fast forward a year, though, and Clover’s operational issues have compounded wildly. The firm racked up more than $450 million in operational losses for the first nine months of 2021. That’s why it’s best to sell the stock before any further mass exodus ensues.
In my mind, Canoo is an electric vehicle (EV) manufacturer that may have fallen too far behind.
No doubt, the company continues to forge ahead with its plans. Those plans include announcements like its selection of Bentonville, Arkansas for its corporate headquarters. Earlier, the company also chose Oklahoma for its manufacturing location; that now includes Fayetteville, Arkansas for its R&D center. Meanwhile, the biggest news is that Canoo will begin U.S. production before Q4 2022.
For comparison, however, Fisker (NYSE:FSR) is slated to begin production in November 2022. The reason Canoo has arguably fallen behind Fisker lies in production. Yes, the timelines look to be roughly the same. But Canoo is building its manufacturing base from scratch. FSR, on the other hand, will be relying on a proven entity in Magna International (NYSE:MGA)
The other competitor to consider here is Lucid (NASDAQ:LCID). It’s far ahead of Canoo as well, although it likewise built manufacturing from the ground up. The company began production in late September.
Canoo had $414.9 million in cash when it reported earnings on Nov. 15. Further, it compiled a $208.7 million loss through the first nine months of 2021. So, this pick of the meme stocks should have somewhere in the neighborhood of $100 million once production starts. Still, other players look to be better positioned and farther ahead than GOEV stock right now.
Meme Stocks to Sell: Vinco Ventures (BBIG)
Next up on this list of meme stocks, Vinco Ventures is a penny stock, meme play associated with several hot themes. For example, it’s associated with non-fungible tokens (NFTs) and owns Cryptyde as well as 80% of Lomotif, a notable rival to social media platform TikTok.
However, at its heart, BBIG stock remains a difficult case to untangle. It’s tough to understand what Vinco’s business is really trying to accomplish. The more you read into it, the less it feels like you know. Warren Buffett’s advice of invest in what you understand comes to mind here.
What’s abundantly clear is this company has modest revenues. Vinco recorded $2.23 million in Q3, down 11.5% from the prior-year period. That decrease was attributable to lower sales of personal protective equipment (PPE) — another great example of how the firm is difficult to untangle. Before this article, I honestly wasn’t aware the company even counted on PPE as a revenue stream, much less relied on it.
BBIG’s ventures are diverse, you can give it that much. But that doesn’t inspire any confidence at all. Investors should get the feeling that Vinco Ventures is grasping at straws. With over 20% short interest, the stock is still a short-squeeze play — and nothing more.
Tilray is the next entry on this list of meme stocks, but it’s hard to say that the company actually has any momentum. TLRY stock started 2021 at around $9 and that’s where it sits currently. In fact, to be completely accurate, Tilray is on a long downward slide which began in 2019. So, the momentum it has is simply downward momentum.
That slide has continued even following the Aphria merger back in May. TLRY stock doesn’t seem to be able to attract investor capital despite the fact that it’s one of the largest cannabis cultivators globally. Sure, the company continues to provide hope that it will someday become a leader in the U.S. market, but that still remains a dream.
Tilray has increased its scale and revenues along the way, but the market just doesn’t care. Several years into legalization, it simply looks like the industry may never fulfill early expectations. Still, Tilray’s literature suggests that Europe may be the next target:
“The European Union, which has nearly twice the population of the U.S. and where Tilray already has a very meaningful presence, represents a powerful growth market, and could potentially be a $1 billion business for the Company.”
It’s fairly clear that investors have grown tired of the promises of hope, however. They want results — and Tilray isn’t delivering.
Meme Stocks to Sell: Ocugen (OCGN)
Last up on this list of meme stocks, Ocugen provided an update on its effort to get its Covid-19 vaccine, Covaxin, U.S. Food and Drug Administration (FDA) clearance on Nov. 26. The update was bad news. Essentially, the FDA issued a clinical hold on the company’s Investigational New Drug (IND) application.
That’s yet more information suggesting Covaxin will never generate significant revenues in the United States, if ever. The good news, however — if it can be called that — is that Ocugen only suffered a $10.7 million loss in Q3. Further, it maintained $107 million in cash in the period, so it can continue to seek FDA approval for quite some time.
Still, that simply looks no closer to becoming a reality than when the company initially partnered with Bharat Biotech. All told, OCGN stock is one to avoid.
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On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.