They’re back! As we conclude the first month of 2023, it appears that meme stocks are once again rallying. Some of the most popular names in the meme-stock craze that dominated markets and news headlines two years ago are soaring to begin the New Year, much to the dismay of traders and short sellers on Wall Street. But will this current rally last? Or will these troubled stocks one again run up only to deflate and end lower than where they began? The smart money is on a repeat of the recent past, so investors should be careful. Here are three short-squeeze stocks to sell before investors cash out.
|BBBY||Bed Bath & Beyond||$3|
Bed Bath & Beyond (BBBY)
This one is pretty obvious. The New Jersey-based home-décor retailer has been warning for weeks that it is on the verge of bankruptcy. Most recently, Bed Bath & Beyond (NASDAQ:BBBY) reported that it had defaulted on a credit line it has with JPMorgan Chase (NYSE:JPM) and issued its starkest warning yet that it is likely to file for Chapter 11 protection from its creditors.
So, what has the impact been on BBBY stock? In 2023, the share price is up 21%. In the first two weeks of January, the stock rose more than 250% as retail investors executed a short squeeze on it in anticipation of a bankruptcy filing. The huge rally made no sense from a logical standpoint, although the company’s approaching bankruptcy made it a good candidate for a short squeeze.
However, what goes up is sure to come down as investors quickly take profits and dump BBBY stock. As a result, BBBY is definitely one of the meme stocks to sell. If the company officially files for bankruptcy, the shares will almost certainly become worthless. So don’t be left holding the bag, and avoid Bed Bath & Beyond’s stock.
Short-Squeeze Stocks to Sell: GameStop (GME)
On Jan. 27, the shares of video game retailer GameStop (NYSE:GME) rose 14% even though no news related to the company was released.
So far in 2023, GME stock is up 33%. The current rally of GameStop is being entirely driven by retail traders launching yet another short squeeze of their favorite meme stock, GME.
Literally nothing substantive has changed with the Dallas-based company that continues to operate more than 4,500 video game retail outlets across the U.S. and Canada. Those retail outlets are increasingly antiquated as consumers switch to buying digital downloads of video games online. GameStop’s earnings continue to be dismal, and the company’s turnaround strategy has yet to produce any meaningful results. Wall Street analysts refer to GME stock as “dead money.”
Yet two years after the birth of the meme-stock craze, GME stock is having yet another moment in the sun. But don’t be fooled! Remember that GME was trading near $87 (on a split-adjusted basis) at the height of its popularity.
Since then, this stock has only gone down despite the repeated short squeezes of it.
AMC Entertainment (AMC)
The meme stock that appears to be having the best run currently is movie theater chain AMC Entertainment (NYSE:AMC). As the first month of the year draws to a close, the share price of the Kansas-based company is up 25% so far in 2023.
To be fair, the theater business of AMC, which operates the biggest chain of movie theaters in the world with more than 10,000 screens, is rebounding.
With its theaters back to operating at full capacity following the Covid-19 pandemic and blockbuster movies such as Avatar: The Way of Water and Top Gun: Maverick drawing people back to the big screen, AMC’s outlook has brightened.
However, movie theater attendance still remains about two-thirds of pre-pandemic levels, and AMC is saddled with crippling debt of nearly $1 billion and also recently defaulted on a loan.
Also importantly, AMC most recently reported a quarterly loss of $3.65 per share and announced a 10-for-1 reverse stock split, while there are legitimate concerns as to whether AMC Entertainment can remain a going concern.
Despite the big run of AMC stock so far in 2023, AMC stock is still down 65% over the last year. Stay away from this stock!
On the date of publication, Joel Baglole 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.