3 Meme Stocks to Sell before You Lose Your Shirt, Shorts and Shoes

We’re back in a bull market, but it’s not close to being the same type of bull market that we saw from mid-2020 to early 2021. Obviously, unlike in that period, the vast majority of stocks aren’t rallying now, and meme stocks aren’t routinely soaring by a few hundred percent over a month or two. In fact, as we saw from the recent Bed Bath and Beyond (OTCMKTS:BBBYQ) debacle, investing in meme stocks can be very dangerous at this point. Moreover, with most consumers’ stimulus money now gone and college loan payments resuming later this summer, I think we’ll witness quite a few more meme stock crashes in the coming months.

But in the stock market, one person’s woes can be another person’s profit. In other words, investors can make money by betting on meme stock crashes that will occur down the road. Indeed, I’m short selling two meme stocks that are featured in this column in an effort to do just that.

If you’re a risk-tolerant investor looking for stocks to sell short, consider short selling one or two of these meme stocks.

GameStop (GME)

GameStop (NYSE:GME) stock rallied in recent days after the firm disclosed that its newly installed chairman, Ryan Cohen, had hiked his stake in GME stock to 12%.

But given Cohen’s history with Bed Bath & Beyond, the news actually made me more bearish on GME. Specifically, a few days after Cohen’s investment company reported last August that it had obtained call options on 1.67 million shares of Bed Bath & Beyond, sparking a rally in the shares, Cohen’s firm unloaded all of its bullish bets on the company.

As a result, I believe that the recent disclosure of Cohen’s purchase of GME’s shares could foreshadow a similar dumping of the retailer’s stock by the multi-billionaire.

Supporting my thesis, on June 15 GME had already dropped as much as 5% below the high that it had reached after Cohen’s share purchase was disclosed.

But more importantly, as I’ve stated in the past, I believe that the company’s decision to largely give up on its efforts to build up its e-commerce business was a horrible move that will result in it shortly being one of the meme stock crashes.

Coinbase (COIN)

After the SEC sued Coinbase (NASDAQ:COIN) on June 6, in line with my previous thesis on the name, Forbes columnist Kenneth Rapoza theorizes that the lawsuit is likely to “upend exchanges as they are now.”

I agree with that. Since the lawsuit contends that Coinbase can’t legally be a broker of trades involving most cryptos and operate a crypto exchange at the same time, the company is probably going to have to give up one of those businesses, greatly reducing its revenue and causing its already high losses to surge tremendously.

Moreover, in all probability, the lawsuit by the SEC in the near term is going to have a huge, chilling effect on Coinbase’s business. That’s because many retail traders and institutions probably are not going to want to have anything to do with an exchange that has been sued by Washington.

As if all that wasn’t enough, Coinbase has yet another big, long-term threat. Specifically,  the firm was hit with a “show cause” order by 11 states earlier this month. Under the order, which was issued June 6, Coinbase has 28 days to produce evidence that it “should not be directed to cease and desist from selling cryptocurrencies in those states.”

Two of the country’s most populous states — California and Illinois — are among the litigants. Moreover, I don’t know too much about operating websites, but I imagine that preventing consumers in certain states from accessing a website could be a logistical nightmare.

Despite all these problems and threats, COIN stock is ludicrously still trading at an elevated valuation of 4.35 times its sales over the 12 months that ended in March.

AMC (AMC)

In the first quarter, U.S. movie theaters’ revenue was still 25% below 2019 levels — and movie theaters were far from a great business in 2019, when the Netflix (NASDAQ:NFLX) phenomenon had already become quite prevalent.

While hit movies could bring movie sales on par with or even slightly above 2019 levels for a month or two at a time, such a trend is unlikely to last for significant periods. Unless somebody comes up with a brilliant idea to reinvent movies and/or theaters, the theater business will, in all probability, remain a terrible one for the foreseeable future.

Given those points, it’s far from surprising that, despite AMC’s (NYSE:AMC) revenue climbing 21.5% year-over-year last quarter, it still used nearly $190 million of cash to fund its operating activities last quarter.

Despite all of its problems, the company’s enterprise value/EBITDA ratio is still a fairly hefty 3.26. Moreover, as of the end of Q1, it had $496 million of cash but a huge $9.66 billion of debt.

On the date of publication, Larry Ramer was short COIN and GME. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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