Roaring Kitty brought meme stocks back to life. His first post in three years in mid-May caused GameStop (NYSE:GME) shares to triple in value almost overnight. It also dragged other left-for-dead meme stocks along for the ride.
Yet, the reaction to the meme lord (his real name is Keith Gill) by Wall Street was telling. The Wall Street Journal reported that discount broker E-Trade, owned by Morgan Stanley (NYSE:MS), was mulling whether to ban him from the platform. The investment firm’s financial crimes division was examining whether his options trades before his social media post were legal. The trades also came under scrutiny from the Securities & Exchange Commission and state securities agencies.
While we can debate whether the video game retailer is a good investment — I tend to disagree with Gill — canceling him and prohibiting him from trading seems extreme.
What shouldn’t be up for debate is the meme stocks to sell below. These companies had no business jumping as they did. Gill wasn’t recommending their shares, only GameStop. Traders were simply trying to revive the meme stock-buying frenzy of 2021.
Here is why you should avoid these meme stocks to sell.
AMC Entertainment (AMC)
Movie theater operator AMC Entertainment (NYSE:AMC) became every bit as much of a poster child for the meme stock trade as GameStop. Diehard loyalists deemed themselves “apes” who would HODL (hold on for dear life) to AMC stock no matter what. Unfortunately, that hasn’t amounted to much. Shares have lost 99% of their value from their high point three years ago.
However, the Roaring Kitty social media post brought the stock back to life, and a better-than-expected first-quarter earnings report helped it hold onto its value. The movie theater stock has more than doubled from its April lows.
Yet better-than-expected does not necessarily mean good or sustainable. AMC Entertainment is still hurting because the movie industry remains in decline. Theater attendance is down as Hollywood forgot how to make blockbuster movies. This summer’s lineup started with a dud, and there are only one or two films that have hopes of hitting it big.
It doesn’t bode well for AMC Entertainment going forward, making it the first meme stock to sell now.
Trump Media & Technology Group (DJT)
Shares of Trump Media & Technology Group (NASDAQ:DJT) remain flat from where they were when the social media company of former President Donald Trump began trading on the Nasdaq exchange. Over the past month, though, the stock is down 30%. Expect it to continue being volatile.
As the presidential campaign heats up heading into November’s elections, investors are likely in for a roller coaster ride as the former president commands even more attention on the national stage. His Truth Social platform will be a key part of how Trump amplifies his message, which could determine whether it remains a viable business.
So far, it doesn’t look good. Although Trump Media doesn’t publish daily active user numbers, arguing they are not useful for a new platform, sites that track visits indicate usage is falling. While Trump has not really posted much on X (formerly Twitter), CEO Elon Musk will be hosting a town hall-style meeting with him on the platform. That draws attention away from Truth Social.
Ultimately, there is a very limited audience for the platform. Because of the president’s polarizing personality, many won’t use the site. It will primarily be for those committed to following Trump. While that’s not necessarily bad, it also doesn’t offer much hope for growth.
At $37 per share, there is a lot of air under Trump Media & Technology Group stock through which it can fall.
BlackBerry (BB)
Once known for its revolutionary mobile handsets, BlackBerry (NYSE:BB) is a very different company today. It is now a security and software business, which, though offering critical services, is a shell of its former self. It is experiencing growth but not on a scale necessary to take on its larger, better-financed rivals. There is a niche for BlackBerry stock to exist but not much to make an investment out of.
BlackBerry’s main business is cybersecurity. It offers secure communications platforms, endpoint control systems and analytics tools and services. The company is very much in the same vein as CrowdStrike (NASDAQ:CRWD) and Snowflake (NYSE:SNOW), though on a dramatically smaller scale. It also tends to perform best in regulated markets, such as government, healthcare and financials, where security is paramount. But that could limit growth as well as expansion into other enterprise-class industries.
BlackBerry also targets the auto industry with semiconductor, safety systems and cabin feature technologies. Despite its QNX operating system offering good growth prospects with original equipment manufacturers (OEM) and Tier 1 suppliers, it is the smaller of BlackBerry’s two businesses.
In short, there’s not a lot to expect from BlackBerry. It is a relatively small fish in a small pond. The stock is down 54% over the past year, and there do not appear to be any catalysts to reverse its course.
On the date of publication, Rich Duprey 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.
