AMC, other meme stocks retreat from highs on Wall Street; another crash coming for Reddit traders?

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The rally has been predominantly fired by young investors on the internet. (Image: REUTERS)

Meme stocks such as AMC Entertainment, BlackBerry, among others retreated from highs during the latter half of the previous week, as investors booked profits fearing another washout of gains like earlier this year. The rally in meme stocks took the centre stage on Wall Street for the second time in 2021 when AMC Entertainment’s share price soared 103% in one day. Internet-fueled rallies were seen in not just AMC’s stock but even in BlackBerry, Nokia, GameStop, Bed Bath & Beyond, and Microvision, among others. Most of the meme stocks ended in red on Friday, giving up part of the gains made earlier in the week.

“Investors are people with capital that have a good reason to believe that a company that they own a piece of will produce future value.  Most people who are following the herd with meme stocks are not investors,” Richard Smith, CEO of The Foundation for the Study of Cycles, told Financial Express Online. “This rally can end just as quickly as it began. That is the nature of memes. They are volatile. Anyone with profits today should sell, thank their lucky stars and start to really learn about investing,” he added.

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Since the end of May, AMC Entertainment stock price is up 83%, while BlackBerry is up 38%, and Bed Bath & Beyond is up 14%. The star among meme stocks during their previous rally in April, GameStop has only managed to jump 12% this time. However, this is half the story. GameStop has dropped 12% in the previous two trading session, BlackBetty is down 10%, while AMC has dived 23%. “No one should be buying AMC today in the hopes of it doubling from here. I suppose that it is a little bit better than buying a lottery ticket but not much,” Richard Smith said.

The rally has been predominantly fired by young investors on the internet. “Meme stocks are feeding on themselves because of the success of this recent rally powered by the internet and a Gen Z mindset that believes group movement is power,” said Eric Schiffer, CEO of The Patriarch Organization — a private equity firm. In a recent press release, AMC Entertainment said that more than 3.2 million individual investors owned a stake in AMC as of March 11 this year. This translated to over 80% ownership of the company, according to the release. 

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