If there is any indication of the type of year it has been in the global financial markets, this week saw a group of rogue investors from the Reddit group r/WallStreetBets stick it to hedge funds and short sellers. The group targeted specific companies who have a high number of their shares shorted, and initiated one of the largest coordinated short squeezes in history. The stocks ran so high that they were halted by the NASDAQ, after huge investments from notable figures like Elon Musk and Chamath Palihapitiya. So what does the future hold for these stocks? In the investing world, what goes up doesn’t always come down, but in the case of these companies, they may have a rocky future for investors who bought in at the top.
GameStop ($54.67|4.05%): The stock that started it all, GameStop was on the verge of financial collapse earlier in 2020, but it has skyrocketed in 2021 thanks to r/WallStreetBets. In the past week, GameStop has accumulated its highest market cap in history reaching nearly $24 billion before it was halted. Shares now have a 52-week low of $2.57 and a 52-week high of $380.00 per share. But GameStop is not a company that will be left for dead after this. It has a surprisingly strong balance sheet for a brand that has been struggling since video games moved to a digital format. GameStop still has a solid supply chain and logistics system that is intact, and many investors, including investor Ryan Cohen who was vocal about transforming GameStop into an eCommerce platform. Stay tuned!
Blackberry (NYSE:BB): This is another company that has been resurrected by r/WallStreetBets, but BlackBerry is a little different from GameStop. The former mobile phone maker has actually made some good business moves lately including selling patents to Chinese company Huawei, and partnering with Amazon ($3125.6|-0.65%) and its AWS platform to begin designing autonomous driving software. BlackBerry will probably be the best long-term investment of these three companies, and it is still at a reasonable price point.
AMC (NYSE:AMC): The struggling movie theater leader saw its fortunes reversed as a result of the ‘save AMC’ movement which got the attention of r/WallStreetBets. The result is AMC’s stock gaining over 200% and according to the CEO, temporarily saved it from bankruptcy. The key word here being temporarily, as we are still unsure of how movie theaters will bounce back once the COVID-19 pandemic is under control. For now, AMC and its 11,000 global cinemas and 1,000 U.S. locations will continue to operate in a limited capacity. How is this going to be in the long term? I still wouldn’t want to bet on movie theaters being the same post-pandemic as they were before.
Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.