This week brings the release of what may be the fall’s most highly anticipated movie. Dumb Money tells the story of the iconic 2021 GameStop (NYSE:GME) short squeeze that gave rise to the term “meme stock.” Of course, we all know how the story turns out; years later, GME stock is still a favorite among the retail crowd. Now as the film catches fire, though, some investors have high hopes for both GameStop and fellow meme stock AMC Entertainment (NYSE:AMC).
It’s no secret that the r/WallStreetBets crowd is always on the hunt for a catalyst to drive the next short squeeze. It’s also not unrealistic to think that a movie about the 2021 meme craze could inspire another GME stock buying spree. But in this case, the optimism is misguided.
Let’s take a look at why this hyped-up film won’t generate any real growth for either AMC or GME shares.
What This Means for GME Stock and AMC
With trailers for Dumb Money being played all over, it’s hard to ignore the hype around the movie. After all, the film highlights the David versus Goliath aspect of the GME squeeze. “They beat Wall Street at their own game,” one preview announces. Citadel founder Ken Griffin — who appears as a prominent character in Dumb Money — has also criticized the film. That will likely only send even more meme stock fans to the theater.
All of this buzz could easily convince aspiring investors that now is the time to go all in on GME stock. But as always, it’s important to examine the matter from a macro perspective. While Dumb Money may create some superficial momentum to begin with, when the hype surrounding the film dies down, both GME and AMC stock will end up back at the bottom.
Why? Well, put simply, neither company is a good buy. Wall Street bet against GameStop and AMC Entertainment because both are unstable companies with outdated business models.
Forays into the non-fungible token (NFT) marketplace and elsewhere haven’t worked out for GameStop. Now, as InvestorPlace’s Thomas Yeung notes, the company has “stopped investing for growth.” Additionally, Executive Chairman Ryan Cohen is facing a regulatory probe that should worry investors.
Meanwhile, AMC stock has seen some momentum this week but is still down more than 65% for the past one month. A reverse stock split and preferred share conversion have only hurt sentiment for AMC. As InvestorPlace contributor Jeremy Flint reports:
“Very few will be surprised if AMC goes bust within a few years. If you’re still hoping for a short squeeze on AMC, don’t. The best time to sell was in 2021 but, if you’re still invested, the second best time to sell is today.”
Dumb Money, Smart Decisions
Dumb Money may make it all too easy to root for another GameStop short squeeze. Unfortunately, though, history has proven that simply rooting for a squeeze is not enough. Every time a meme stock surges, it ends up flaming out and falling again just as quickly. We’ve seen it from AMC, Bed Bath & Beyond (OTCMKTS:BBBYQ) and plenty of others. No matter whatever hype the movie helps create, another squeeze like the ride in 2021 isn’t coming.
All told, it’s game over for GME stock and curtains for AMC. Investors should make the smart decision and avoid new positions in these washed-up companies.
On the date of publication, Samuel O’Brient 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.
