3 Actions Why You Shouldn’t Go To Meme Extremes In 2022

Despite fundamental weakness, meme stocks grabbed headlines last year due to their meteoric short-term rallies. Retail investors have gathered on popular social media forums like Reddit’s WallStreetBets (WSB) to make aggressive bets against hedge funds, sparking unprecedented rallies in some fundamentally weak stocks. However, these stocks could not sustain the price levels they reached.

After a break of a few months, the same mania has recently returned, leading various struggling stocks to soar significantly. However, these fundamentally weak stocks are expected to come back to earth soon from their unsustainable levels in an uncertain macro environment, leading to massive losses for retail investors.

August’s Consumer Price Index (CPI) report showed inflation rising 8.3% year over year, higher than economists’ expectations. Stubborn inflation should prompt the Fed to continue raising interest rates, potentially triggering a recession. These factors are expected to keep the stock market under tremendous pressure over the coming months.

Therefore, Roblox Corporation’s fundamentally weak meme stocks (RBLX), AMC Entertainment Holdings, Inc. (CMA) and Bed Bath & Beyond Inc. (BBBY) are best avoided now.

Roblox Company (RBLX)

RBLX operates an online entertainment platform. The company provides Roblox Studio, a set of free tools for developers and creators to create, publish and run 3D content; Roblox Client, an app to explore the digital 3D world; Roblox Cloud, which provides cloud-based services and infrastructure; and Roblox Education for learning experiences.

During the second quarter of fiscal 2021 ended June 30, 2022, RBLX’s costs and expenses increased 27.5% year over year to $761.47 million. Its operating loss widened 19.1% year-over-year to $170.27 million. Its adjusted EBITDA declined 69.7% year over year to $54.64 million.

Additionally, the company’s net loss attributable to common shareholders was $176.44 million, down 25.9% year-on-year. Its net loss per share attributable to common shareholders rose 20% from the prior year’s value to $0.30. Additionally, free cash outflow was $57.32 million compared to $168.02 million for the prior year period.

Analysts expect RBLX’s loss per share to be $0.31 for the third quarter of fiscal 2022 ending September 2022, a 137.3% worsening from the same period in 2021. In addition, the consensus estimate of loss per share for the current year (ending December 2022) is expected to rise 24.4% year-over-year to $1.21.

Shares of RBLX are down 11.4% in the past month and 54.4% year-to-date to close the last trading session at $45.07.

RBLX POWR Rankings fit into these gloomy prospects. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.

RBLX has an F rating for stability and feeling. It has a D rating for Growth, Value and Momentum. Within 22 actions Entertainment – Toys and Video Games the industry, it is ranked last.

To view additional POWR (momentum, growth, value, and quality) ratings for RBLX, Click here.

AMC Entertainment Holdings, Inc. (CMA)

AMC is a premier theatrical exhibition company that delivers distinctive, cinematic experiences. The company owns, operates and has interests in theaters in the United States and abroad. It manages more than 950 rooms and 10,600 screens.

In February, AMC completed a private offering of $950 million in aggregate principal amount of 7.5% senior secured notes due 2029. This note offering is expected to increase the company’s debt and interest.

For the second quarter of fiscal 2022 ended June 30, 2022, AMC’s operating costs and expenses increased 59.5% from the prior year value to $1.18 billion . From the company operating loss and the net loss amounted to $16.10 million and $121.60 million, respectively. Its adjusted loss per share was $0.20 for the second quarter.

Additionally, the company’s cash outflow for operating activities amounted to $76.60 million. As of June 30, 2022, its cash and cash equivalents were $965.20 million, compared to $1.59 billion as of December 31, 2022.

Analysts expect the company’s loss per share to be $0.23 for the third quarter of fiscal 2022 ending September 2022. In addition, the consensus estimate of loss per share for the current fiscal year 2022 (ending December 2022) is expected to be $1.10. The company has missed consensus EPS estimates in each of the past four quarters.

The stock has plunged 57% in the past month and 79.1% in the past year to close the last trading session at $9.91.

AMC’s POWR ratings reflect this poor outlook. The stock’s overall D rating is equivalent to a sell in our proprietary rating system. AMC has an F rating for feeling and stability. In category F Entertainment-Movies/Studios industry, it is ranked #6 out of 7 stocks.

Click here to access AMC’s additional POWR ratings (Growth, Value, Quality and Momentum).

Bed Bath & Beyond Inc. (BBBY)

BBBY operates a chain of retail stores that sells domestic merchandise, home furnishings, consumables and various children’s products internationally. It also operates Decorist, an online interior design platform that provides custom interior design services.

In the second quarter, there was a sharp shift in consumer sentiment as macroeconomic pressures intensified noticeably. This includes record inflation and fluctuations in buying habits, leading to a dislocation in the company’s sales and inventory.

Sue Grove, BBBY’s interim chief executive, said: “The simple reality is that our first quarter results have not lived up to our expectations, nor do they reflect the true potential of the company.

BBBY’s net sales decreased 25.1% from the prior year period to $1.46 billion in the first quarter of Fiscal 2022 ended May 28, 2022. The company’s adjusted gross profit was $348.15 million, down 48.9% year-over-year. Its adjusted EBITDA loss was $224 million, compared to a gain of $86 million a year ago.

Additionally, BBBY’s adjusted net loss was $225.24 million compared to net profit of $4.93 million in the prior year quarter. Its adjusted loss per share was $2.83, compared to EPS of $0.05 a year ago. The company had $107.54 million in cash and cash equivalents, down 90.2% year-over-year.

The consensus revenue estimate of $6.11 billion for fiscal year 2022 (ending February 2022) represents a 22.3% decline from the prior year. The consensus year-to-date loss estimate of $6.90 per share indicates a 539.3% year-over-year widening. Additionally, the company has missed consensus revenue estimates in each of the past four quarters.

The stock has fallen 54.4% over the past six months and 63.2% over the past year to close the last trading session at $8.76.

BBBY’s POWR ratings reflect its poor outlook. The stock has an overall D rating, which equates to a sell in our proprietary rating system. It has an F rating for stability and sentiment and a D for growth and momentum.

BBBY is ranked #58 out of 62 stocks in the Home improvement and goods industry. Click here to see additional ratings for BBBY value and quality.

RBLX shares were trading at $45.75 per share Thursday morning, up $0.68 (+1.51%). Year-to-date, RBLX is down -55.65%, compared to a -16.83% rise in the benchmark S&P 500 over the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. After…

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