There are seven meme stocks to sell in April before the worst comes to worst. Meme stocks are often driven by hype and social media frenzy rather than fundamental business factors, can be incredibly volatile and unpredictable. While the potential for big gains can be enticing, the risks involved shouldn’t be overlooked.
These stocks can experience sudden and dramatic price swings, fueled by the whims of retail investors rather than the company’s actual performance. This makes it extremely difficult to predict when the bubble might burst, leaving investors vulnerable to significant losses.
However, not all meme stocks are created equal; some are more risky than others. Therefore, in order for investors to protect their portfolios against volatility, i’ve selected seven meme stocks to sell for this article that one should carefully consider.
So here are seven meme stocks to sell before it’s too late. Don’t get caught up in the hype or Fear Of Missing Out (FOMO) at the expense of your portfolio.
GameStop (GME)
GameStop (NYSE:GME) has been a hallmark name in the meme stock frenzy. It minted millionaires, but many more have lost money buying 0dte calls, trying to cash in on the apparent war against the hedge funds and other institutions.
Granted, there has been some impressive growth in tangible book value and levered free cash flow over the past three years, but analysts also anticipate a revenue decrease of 11.8% year-over-year to $1.09 billion for the first quarter ending April 2024.
Furthermore, GME’s current ratio and quick ratio suggest a strong liquidity position, although its return on equity and assets indicates less favorable performance compared to industry standards.
The GME bandwagon has subsided considerably, as I believe that the reality of GME’s continually shrinking main line of business is starting to hit home for many. I don’t see a way forward for GME, so it’s then one of those meme stocks to sell.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) experienced a notable decline from its peak stock price, facing challenges in ramping up production and maintaining investor enthusiasm.
RIVN projected a production target of 57,000 vehicles for 2024, following its performance in the first quarter where it produced 13,980 vehicles and delivered 13,588. The company also reported a net loss of $5,432 million, an improvement from the previous year’s $6,752 million. Its gross profit also saw improvement, with a loss of $2,030 million in 2023 compared to a loss of $3,123 million in 2022.
However, despite these improvements, in the same year, it had capital expenditures of $1,026 million, and ongoing need for substantial investment to scale production capabilities and develop new models.
I feel that the need for additional capital is a serious risk, as it could lead to share dilution for investors or substantially add to its financial risk via debt financing, which makes it one of those meme stocks to sell.
Marathon Digital Holdings (MARA)
Marathon Digital Holdings (NASDAQ:MARA) is a Bitcoin (BTC-USD) mining company that’s seen significant interest from investors due to the cryptocurrency market’s volatility and the upcoming Bitcoin halving event, which will occur in under two weeks at the time of writing.
I don’t generally suggest that investors should buy Bitcoin mining company stocks as they are risky investments. As the blockchain reward halves for Bitcoin, companies like MARA are under increasing pressure to maintain their margins, which then puts pressure on Bitcoin to increase in price to maintain stability.
Analysts project a final loss in 2023 with positive profits of $61 million expected in 2024, underpinned by an estimated average annual growth rate of 119%.
The company specific-risk for MARA is that its strongly-invested in the Bitcoin mining industry and lacks diversification into other operating segments. It has one of the strongest hash rates in the industry at 24.7 in 2023, making it overly concentrated compared to its peers.
Nio (NIO)
Nio (NYSE:NIO), a Chinese electric vehicle manufacturer, has faced corrections due to concerns over its operating losses and the sustainability of its vehicle delivery growth.
Analysts highlight concerns over declining electric vehicle deliveries and market share in China, pointing towards a challenging outlook for NIO. Furthermore, the company’s Q4 results showed margin contraction and widening losses, indicating the hurdles it faces in maintaining its growth trajectory and achieving profitability.
NIO is a meme stock that has also lost its appeal as the one to watch for the weak, and further risks of capital depreciation I feel are very real. It has already lost 47.96% of its value over the past year, and it seems likely that it will drop further due to the structural weaknesses in China and its shaky fundamentals. I therefore recommend that investors steer clear of NIO, and also designate it as one of those meme stocks to sell.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) has drawn attention in the electric vehicle space but faces challenges in maintaining its stock value. Highlighting this, its share has dropped 83.09% in value over the past five years.
PSNY recently secured $950 million in external funding, which marks a new phase for the company. This is expected to be more significant in the second half of the year as their SUVs reach full production and distribution.
However, some cracks in the thesis start to appear when one examines PSNY’s financials. For instance, it has almost three times as much debt as cash and cash equivalents on its balance sheet, and had a negative cash flow of $1.8 billion over the past twelve months. More funding is needed for it to continue its operations, and this could very well come as a mix of both an equity raise and a raise through additional debt, which puts even more stress on the company.
Lyft (LYFT)
Lyft (NASDAQ:LYFT) is adapting to a post-pandemic world, focusing on profitability. However, it remains to be seen if these efforts can sustain its meme stock status.
The company has had negative accounting profits over the last twelve months. However, in the future, it’s expected to reach profitability, but this comes at a steep price. Its forward P/E ratio is 35 times earnings, which is much higher than the median of its peer companies that also operate in the ride hailing market.
For the fiscal year 2024, LYFT anticipates gross bookings of approximately $3.5 billion to $3.6 billion for Q1’24, with an Adjusted EBITDA of $50 million to $55 million. The full year’s directional guidance suggests mid-teen year-over-year growth in rides.
However, this does not change the fact that its shares could still be perceived as overvalued, especially when one considers that it’s revenue is only expected to climb 12.33% next year and is already at 5.23 billion at the time of writing. It hasn’t managed to grow its bottom line despite its robust revenue growth, and I’m doubtful this will change in the foreseeable future.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) became synonymous with meme stock rallies during the pandemic. Those days are long over, and traders looking to pump enthusiasm into this stock will end up getting burned sooner or later.
For 2024, AMC is expected to see a revenue increase, going from $4.55 billion in 2023 to a projected $5.26 billion. This optimistic revenue forecast suggests a rebound, including a forecasted increase in EPS from -1.63 to -0.81, indicating an improvement in losses. Analyst consensus on AMC’s stock leans towards a “Sell” rating, and I think this should not be taken lightly.
AMC’s issues are the same as GME’s; futile attempts at pivoting to a world and consumer preferences that no longer support its core business model. This kind of pessimism is well-deserved given its lack of a constructive track record, and is therefore one of those meme stocks to sell as well.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.