- AMC (AMC) and GameStop (GME) have done well to make sure they take advantage of the recent surge.
- GME stock continues to hold steady despite a volatile market.
- However, AMC’s underlying business is doing better than GME.
GameStop (NYSE:GME) shows no signs of turning the tide when it comes to fundamentals. The only area where GameStop can see some success is cash management, which means it has enough money to continue operating until its financial situation improves. Still, GME is such a strong meme stock that many investors remain skeptical of aborting ship right now. However, the same can be said for AMC (NYSE:AMC) stock, which in my opinion, is the better meme stock.
Both AMC and GameStop have done well to make sure they take advantage of the recent surge and issue equity to shore up their respective balance sheets. It also helps that billionaire Ray Dalio’s hedge fund, Bridgewater Associates, recently picked up the two meme stocks. However, analysts and investors can get a bit more subjective beyond that. While chances are slim, there is still a possibility that GME will recover. This would only be the case if investors would like to speculate on the matter. They should invest cautiously.
I will say the same about AMC; however, its underlying business seems to be doing well. In recent months, the company has benefitted from big tentpole releases and can look forward to a pretty full content slate coming up.
GME and AMC have different fortunes right now. GME seems to be more closely related to an irrational valuation than AMC despite a few differences.
Why Is GME Stock on the Rise?
Despite a volatile market, GameStop has maintained its shares at these levels. Their intrinsic value is very low, but they have other avenues of growth thanks to a loyal customer base. Some people might be positive when they hear that the company is launching a new initiative, and one of them is the upcoming launch of their NFT marketplace. They might have also heard that demand for software will continue to improve due to the company’s blockchain technology.
Speculation about GameStop’s potential for recovery is quite high, but it may not come to fruition. Before investing your own money in this speculation, it’s important to be cautious of the risks involved.
Buying shares in a company just because they are rising can seem compelling. With the state of the market today, gaining financial benefits can be very easy. However, if the company is not backed by fundamental strength, the markets will eventually balance the scales.
GameStop is a popular place to shop for games. The company is also in good financial shape, with over $1 billion in cash over their debt. This provides GameStop with a pretty large amount of wiggle room, but it still has to make commitments here and there, knowing that profits can be rather volatile. In 2021, the company had negative operating cash flow and a bad year for EBITDA.
Nothing an analyst or prominent investor says won’t be worth anything if you’re speculating. For speculators, this might make sense, but for real investors, GameStop is not a company to seriously consider buying in.
AMC Is Doing Well
AMC recently impressed analysts with an earnings beat. Despite a non-GAAP loss, its revenue hit $785.7 million for the quarter. These numbers handily beat analyst estimates, marking a big win for the meme stock.
AMC stock jumped after its move beat Wall Street’s expectations for the first quarter. The report came when other industries were struggling, making the story on AMC stock particularly enticing to those looking to invest in off-trend meme stocks.
The post-pandemic period brought many people to theaters for the first time in a long time, so it’s not surprising there was an increase in ticket sales. What has helped is the slate of tentpole releases that have kept the cash registers ringing.
In addition, the company has launched initiatives that have stoked investor interest. Some make sense to the average investor, such as popcorn outside of movie theaters. Others like the investment in struggling gold and silver miner Hycroft Mining Holding (NASDAQ:HYMC) excite Reddit users, an important investor segment for AMC.
If You Want to Play the Meme Game, Buy AMC Stock
It is not recommended to invest in low-quality companies given the high risk involved. Investment planning should be done with care and cannot be treated lightly.
However, if you are the kind of investor who wants to take on risk, then AMC is a much better proposition than GME. Another aspect to consider is that AMC has dropped 56% this year and is trading close to its 52-week low. No such luck with GME stock, which is yet another reason to stay away.
On the publication date, Faizan Farooque did not have (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.