AMC Entertainment Holdings (NYSE:AMC) and Gamestop (NYSE:GME) haven’t been doing as well this week as they did in the past. As of this writing (Tuesday evening), both were down over the prior five trading days. AMC saw an extreme rally on July 19/20 but has been mostly trending down since then. Gamestop has followed much the same pattern.
With Reddit stocks like AMC and GME, you never know what’s going to happen. Despite talk of a future short squeeze that will send prices higher, it’s most forums and social media that are driving the prices of these stocks. The more attention bulls can get on Reddit and Twitter, the higher Reddit stocks are likely to go. This implies that if posters on these platforms lose interest before a short squeeze occurs, then AMC and GME are going to decline. In this article, I will explore the “Reddit stock” phenomenon and attempt to answer whether the party is truly over — or just in a lull for the moment.
AMC and GME trend downward
Both AMC and GME shares traded trended down for the five trading days ended July 27. AMC was down 8.94% and GME was down 7%. By the standards of Reddit stocks, these aren’t huge losses. AMC at one point this month fell far more than that, before rallying 24% in a single day. With these stocks, 7-8% swings are just part of the territory. However, the trends as of this writing were not favourable to either stock.
What’s driving the price decline?
It’s hard to say exactly what’s driving the price decline in AMC and GME shares, but we can make some educated guesses.
One obvious contributor is a decline in interest on Reddit. According to Docoh.com, neither AMC nor GME cracks the top three stocks on Reddit right now. Previously, both were WallStreetBets mainstays. If Reddit and WallStreetBets are losing interest in AMC and GME, then their shares will probably decline. That’s what we’re seeing now.
Another possibility is long-time holders selling. People who got into the meme stock craze early are sitting on some hefty gains, and it could be that they’re getting impatient waiting for the short squeeze and cashing out. If they did so, they probably wouldn’t tell their followers, who would see it as a betrayal. So, something of that nature could easily be going on.
Could BlackBerry be next?
Although AMC and GME shares are both stagnating right now, another meme stock is worth thinking about.
BlackBerry (TSX:BB)(NYSE:BB) was one of the meme stocks that rose dramatically in January and again in June. It didn’t rise as dramatically as AMC or GME, but it posted some solid gains earlier in the year. At one point, it was trading at $32 — after starting the year at around $6.77. Today, BlackBerry trades for around $12 — it’s still up a lot, but it’s been a loser for Reddit stock traders who got in in late January. It’s Canada’s very own meme stock and — who knows? — maybe it will rise again once Redditors sour on AMC and GME.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends BlackBerry.