GameStop and AMC Entertainment would have been dead in 2021 if not for a coordinated buying campaign. Their share prices soared to stratospheric levels while their liquidity positions improved significantly. The original ‘meme’ stocks, or underdogs, saved by online retail traders from extinction still trade in 2023.
The meme craze is over, although the new breed of investors is still around. They can use their collective influence to prop up a struggling company. Canadian stock BlackBerry (TSX:BB) was among Reddit’s meme stocks during the frenzy, but its CEO, John Chen, insisted the price rally was due to solid fundamentals.
Cineplex (TSX:CGX) is similar to AMC and would qualify as a meme stock under Robinhood standards. But whether or not you consider them meme stocks, both have legitimate long-term upside.
High-flyer
BlackBerry is outperforming thus far in 2023. At $7.47 per share, the tech stock is up 69.4% year to date. The former smartphone maker lost nearly 63% in 2022, following a 40% positive return in 2021 due to the meme phenomenon. With revenue soaring and net loss considerably thinning, investors are taking the tech stock seriously.
In Q1 fiscal 2024, revenue climbed 147% year over year to US$373 million, while the net loss improved to US$11 million compared to US$495 million in Q1 fiscal 2023. However, for the second quarter, BlackBerry expects lower revenue (US$132 million) due to delays in closing large deals, particularly in the Cybersecurity business unit.
Chen said, “Like many software companies, our Cybersecurity business has experienced elongated sales cycles, particularly in BlackBerry’s core government vertical, where we have a strong market position.” Meanwhile, the Internet-of-Things (IoT) business unit is a silver lining.
According to Chen, the IoT business unit continues to capitalize on its enormous market opportunity and multi-year secular tailwinds. He adds that BlackBerry is well-positioned to secure new design wins at a strong rate. The factors that will impact revenues include the rescheduling of software development programs, changes in production schedules of some large automakers, and macroeconomic uncertainties.
BlackBerry’s full-year revenue forecast for the IoT business unit is between US$225 million and US$240 million. The Waterloo-based company will leverage AI and machine learning to deliver innovative solutions. These initiatives should strengthen its market position in cybersecurity, safety, and data privacy solutions.
Industry rebound
Cineplex lost a big chunk of its investor base during the coronavirus breakout and government-mandated lockdowns three years ago. The $518.4 million entertainment company and theatre operator incurred huge losses in 2020 and 2021 before posting $113,000 in net income in 2022.
Fast-forward to 2023 and the financial results have vastly improved. In the first half of 2023, total revenues increased 32.1% year over year to $764 million, while net income reached $146.4 million compared to a $40.9 million net loss a year ago. Cineplex’s President and CEO, Ellis Jacob, credits the return of strong film products for the top-line results.
Jacob adds that the July 2023 box office revenues soared past the 2019 levels. Cineplex maintains a positive outlook for the exhibition industry and expects the positive momentum to continue. The stock trades at $8 per share (-0.6% year to date), and market analysts’ 12-month average price target is 12.6% (57.9% upside).
Meaningful returns
A rally of “meme” proportions by BlackBerry and Cineplex is unlikely in 2023. However, both stocks should deliver meaningful returns as the businesses rebound.
