Don’t Chase the Meme Stock Rally in AMC

–>Zacks Small Cap Research Issued a STRONG BUY Rating on this Green Energy Company (Smallcaps Daily)

Over the last few days, shares of AMC Entertainment (SYM: AMC) soared from a low of $2.90 to a high of $11.88. All as “Roaring Kitty” sparked a flurry of meme stock buying activity.

Roaring Kitty, or Keith Gill, Gill, “was immortalized in the 2023 film Dumb Money, is best known as one of the voices who prompted the so-called “Reddit Rally” of 2021, in which retail traders squeezed short-sellers who placed bets that the two companies could go bust,” as noted by the New York Post.

And while it’s been fun to watch AMC scream higher, we wouldn’t touch it. After all, AMC could come down as fast as it went up.

The last time AMC ran on a meme boom, it rocketed from about $12 to a high of $551.38 in June 2021. While it was a rewarding ride for those that got in early, it would end in disaster for remaining bag holders.

As noted by Forbes, “Meme stocks often lack financial solidity—such as strong revenue growth, profitability, and cash flow—that would justify their soaring market valuations. Instead, their prices are frequently inflated by traders acting on trends or the thrill of the gamble, rather than sound investment principles. When the inevitable market correction occurs and brings prices back in line with their fundamental worth, investors who bought in at the heightened levels can face steep financial losses.”

In short, if you’re even thinking about chasing the latest meme rally, be cautious.

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