CNBC’s Jim Cramer cautioned investors to get out of stocks like GameStop and AMC, which had seen significant rallies driven by social media. He deemed the trend of meme stock mania as irrational, noting that these stocks had reached inflated levels that were not sustainable on their own. GameStop and AMC surged after “Roaring Kitty,” a key figure in the GameStop short squeeze earlier in 2021, made his first online post in three years. Both stocks saw gains of over 70% on Monday, but interest in them began to wane on Tuesday.
Cramer expressed his belief that GameStop was overvalued compared to its peers in the electronic retail sector. He pointed out that Best Buy, with a comparable market capitalization to GameStop, had much stronger earnings projections for 2023. On the other hand, AMC faced a different scenario according to Cramer. While the movie theater chain was able to raise $250 million amid its stock surge, it still had over $2 billion in debt due by 2026. Cramer referred to AMC as a “dead man walking,” suggesting that investors should sell before it reaches a critical financial stage.
The outlook for GameStop and AMC from Cramer’s perspective underscores the ongoing debate about the valuation and sustainability of meme stocks driven by social media hype. While GameStop was seen as overvalued relative to its peers in the industry, AMC faced potential financial challenges in the coming years due to its substantial debt burden. Despite the recent highs in their stock prices, both companies may struggle to justify their current valuations based on traditional financial metrics.
As GameStop and AMC continue to attract attention from retail investors and day traders, Cramer’s warnings about their potential weaknesses in terms of fundamentals and financial stability add another layer to the discussion surrounding these meme stocks. The recent surge in their stock prices may not be sustainable in the long term, particularly if the companies are unable to demonstrate consistent and strong financial performance. Investors are advised to consider these factors when evaluating their positions in GameStop, AMC, and other similar stocks.
