It’s been quite a volatile few years in the market following the pandemic. The rise of the meme trader, sparked by incredible moves in two of the stocks I’m going to discuss as sells below, created a whole entirely new group of retail investors. Instead of focusing on specific companies’ fundamentals, some investors piled into momentum stocks driven by short squeeze interest. As more buying pressure pushed up prices and short sellers were forced to cover their positions, these traders benefited to an outsized degree, reaping big gains.

Of course, short squeezes are rare events (and they’re supposed to be), so seeing so many squeezes take hold over the past three years really is something to behold. For most long-term investors, fundamentals will remain the most important factor to consider when picking between a group of stocks.

In my view, of the three meme stocks I’m going to discuss below, only one would or could make the list as a potential buy. Let’s dive into these three meme stocks, and why I’m putting them in different buckets.

Key Points About This Article:

• The incredibly volatile moves we’ve seen in a number of top meme stocks over the past year aren’t normal, and investors may not want to get too comfortable thinking they are.
• Of these three highly-popular meme stocks, I think only one may be a buying opportunity, for the right type of investor.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Palantir Technologies (PLTR)

Palantir Technologies (NYSE:PLTR) saw its stock rise sharply after posting better-than-expected Q2 earnings. The company reported $678 million in revenue and $254 million in adjusted operating income, driven by strong growth in its customer base, particularly among commercial clients. Palantir also raised its full-year guidance, signaling confidence in continued expansion.

The company developed platforms like Gotham and Foundry to serve both government and commercial clients. In Q1 2024, commercial revenue surged 27%, surpassing government growth and highlighting Palantir’s successful diversification. The company’s subscription model ensures steady income and growth that continues to surge as customers flock to its AIP bootcamps, which have engaged 1,205 global organizations since mid-2023. This effort boosted the U.S. commercial business, increasing the customer count to 593. The expanding client base and strong government orders are expected to sustain this growth.

Surging 38% over the past week, PLTR stock closed the day on August 9 at $30 per share due to AI advancements and plans. Impressively, this stock is also up 80% year-to-date. Analysts have predicted a potential 18% decline in 2025, with forecasts indicating it could see an increase up to 70%. Analyst sentiments are neutral, with most agreeing PLTR is a hold.

Palantir’s AI integrations have paid off, and the artificial intelligence tailwinds driving this stock higher do appear to be real and meaningful. For investors looking for a meme stock with at least some semblance of fundamental support, this is one I can understand. And while I wouldn’t personally buy PLTR stock at these levels, I can understand why a meme investor could come to the conclusion that might be a good idea. 

GameStop (GME)

Among the most iconic meme stock in the market is GameStop (NYSE:GME). The stock saw a 19% year-to-date increase, but it remains far from its 2021 peak. Despite recent gains, the comapny’s core business struggles. For fiscal Q1 ending May 4, revenue fell to $882 million with a $32.3 million net loss. While this loss was less severe than the previous year, it reflects ongoing challenges, including store closures and incredibly high cash burn. The company ended the quarter with $1.083 billion in cash and $848.3 million in liabilities, indicating significant financial strain.

In June, GameStop reported Q1 2024 results with net sales falling to $882 million from $1.237 billion the previous year. The company’s SG&A expenses increased to $295.1 million, up from $345.7 million. The company ended the quarter with $1.083 billion in cash and holds a low-interest, unsecured COVID-19 loan. With a $9 billion market cap, GameStop has not held a conference call since Q4 2022 and provided no future guidance. The board approved a new policy allowing CEO Cohen to invest in equity and financial instruments, potentially using the company’s $1 billion cash to diversify its business.

In my view, there’s no fundamental argument at all to buy this flailing video game retailer at current levels. Unless something drastically changes, this stock is a hard sell for me right now.

AMC Entertainment (AMC)

Cinema chain AMC Entertainment (NYSE:AMC) is another top meme stock that’s ridden the hype train higher during previous meme stock rallies. Supported by a retail investor group who seemingly didn’t want to see the movie theater chain go bankrupt, this meme stock movement took on a life of its own. Like GameStop, these two retail-focused brands found support in the stock market from an unconventional crowd, and I have to say, I couldn’t have predicted the moves both companies made in 2020 – I don’t think many could have (except for maybe Keith Gill and a few others). 

Unfortunately for long-term investors in AMC stock, the company’s operating model has continued to provide negative cash flow. Moviegoers simply aren’t coming through the turnstiles in the same numbers they once were. Home entertainment and streaming options are so readily abundant, there’s no reason for many to watch a specific film on the big screen and overpay for popcorn while being bestowed with the honor of having your seat kicked and being forced to watch both the screen and the brightly-lit smartphone of the guy in front of you.

Accordingly, it should be no surprise to anyone that AMC’s revenue has continued to decline as streaming growth and content expansion failed to counteract linear TV losses. Despite cost-saving efforts, operating profit dropped sharply due to revenue mix issues. Challenges are expected to persist, but management’s transformation efforts, including plans to restructure $4.5 billion in debt, may be too little too late.

In my view, AMC and GameStop most likely headed the way of BlockBuster. Technology has fundamentally changed how we buy video games and watch movies. While nostalgic, these business really don’t’ provide consumers with any added value anymore. It’s sad to say, but true.

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