3 Stocks to Skip Even if the Meme Stock Rally Continues

Stocks to sell

After a summer rally for meme stocks, the party appears to be winding down. August has traders looking at meme stocks to sell, with many formerly popular names taking big tumbles.

Given the dark clouds on the economic horizon, there is good reason for caution. The Federal Reserve has raised interest rates at a historic rate, and more hikes may be on the menu. Meanwhile, the economy appears to be losing steam as sectors like housing dip and credit metrics worsen.

All this speaks to a softening consumer and fading market sentiment. Even with the generous assumption that meme stocks perk back up, some of them are already too far gone. These three meme stocks should be sold before it’s too late to get out.

AMC Entertainment (AMC)

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AMC Entertainment (NYSE:AMC) has been one of the longest-running meme stocks. Traders have been seeking a big short squeeze in AMC stock dating back to early 2021. However, shares are exceedingly unlikely to ever make it back to the heights they briefly did a couple of years ago.

It’s no secret that AMC’s balance sheet continues to worsen as its losses pile up. And, given its large debtload, rising interest rates mean that the company will face increasing interest expenses as its debts come due.

All this has led management to issue more stock to keep the company afloat. After various shareholder efforts to stop this dilution, courts have cast those obstacles aside and given AMC the greenlight to issue a huge amount of new shares. AMC stock careened 38% lower on the judge’s decision.

Long story short, AMC can now fund its losses by issuing more stock. This will defuse any potential short squeeze as AMC will be flooding the market with new shares. The company is also considering a reverse split. Make no mistake, AMC’s finances are grim, and even a hit movie like Barbie won’t save AMC. That’s why it’s made the list of meme stocks to sell.

WeWork (WE)

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WeWork (NYSE:WE) was supposed to revolutionize the office market. The firm’s founder, Adam Neumann, presented a bold vision of a future of shared office spaces furnished with delightful amenities.

And, for a while, that vision almost worked. WeWork was growing rapidly and securing billions of dollars from well-known backers such as Softbank. However, Neumann struggled to control WeWork’s spending, and the firm’s losses ballooned. The company labored to keep raising enough funding, and a SPAC offering failed to repair the company’s tattered balance sheet.

WeWork recently warned that there is substantial doubt that it can remain a going concern. That’s often a hint that a company may be considering a bankruptcy filing. WeWork’s bonds have also plunged to just pennies on the dollar, suggesting that even the creditors are going to take a bath here. It’s hard to imagine WE stock having any residual value once the firm restructures its gargantuan debtload. Get out while you still can.

fuboTV (FUBO)

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fuboTV (NYSE:FUBO) is a small media company seeking to revolutionize the live TV market. The company offers viewers live television and is particularly popular for sports fans thanks to its access of otherwise hard to stream sporting events.

Unfortunately, it’s unclear if fuboTV has found a viable business model. The issue is that sporting content is extremely expensive. To that point, fuboTV brought in $1.2 billion in revenue over the past 12 months. But it spent $1.2 billion on the cost of delivering those TV streams, meaning that it earned a gross profit of approximately zero. Needless to say, that doesn’t leave much to cover the rest of the firm’s expenses such as overhead, R&D, interest expense, and so on.

Including those other costs, fuboTV ran a net loss of a whopping $438 million last year. Given the firm’s weak balance sheet and significant obligations, it can’t run these sorts of massive losses for long. Yet, when it is essentially giving viewers the streams for the same price it itself pays to the rightsholders, it is hard to see how fuboTV will ever earn much of a profit.

There were hopes to monetize the service in other ways, such as live betting. But the betting venture was shuttered, and there’s little sign of other successful monetization efforts on the horizon. Meanwhile, analysts see the company remaining unprofitable through at least 2025. And there’s not much reason to think fuboTV can remain in business past then anyway given its sea of red ink and dismal unit economics, so you may want to consider adding it to your list of meme stocks to sell.

On the date of publication, Ian Bezek did not have (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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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