Keeping It Simple

[eastunder]

'Meme Stocks' Officially Over As Crash Wipes Out $191 Billion

MATT KRANTZ12:02 PM ET 01/24/2022

https://www.investors.com/etfs-and-funds/sectors/sp500-meme-stock-crash-costs-speculators-48-9-billion/?src=A00220

The meme stock rally was fun while it lasted. But it's now a memory handing out an expensive lesson as it increasingly falls apart versus the S&P 500.

An painful slide in meme stocks the past year erased all aggregate gains by pounding online Reddit traders' favorites, like AMC Entertainment (AMC), GameStop (GME), Peloton Interactive (PTON) and the direct player Robinhood Markets (HOOD). Those are among the hardest hit, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. The analysis looks at the updated 25 most-popular stocks with meme traders plus those most highly shorted compiled by Solactive for the new Solactive Roundhill Meme Stock ETF (MEME).

All told, the value of these 'meme' stocks is down $191 billion from the time they, as a group, peaked on Feb. 9, 2021. And they've lost $177 billion in value in just the past month. Ouch.

Game Over For Meme Stocks

Now the selling has completely wiped out the aggregate gains from the entire phenomenon since the early 2021 peak. And the pain continues. Former meme darling GameStop, which kicked off the Reddit trading rage, dropped more than 42% in the past 30 days on concerns of the company's future.

These 25 stocks, on average, are down 27% in just a month. And that adds up to a painful $177.1 billion loss on them in just four weeks. In comparison, the S&P 500 has been under pressure, too, but it's down just 7.6% in a month. It's the first time many of the speculators playing these risky stocks, many with no fundamentals, have seen losses.

"We have many investors who don't have real depth and experience in the markets right now and, using the analogy of going to a casino, the worst thing that can happen is that the first time you go, you win big," said Eben Burr, president of $2.2 billion in assets advisory Toews. "Then you keep going back and may get reckless — you're not as skilled as you believe and the house eventually wins. Meme stocks have to be seen as a very speculative move."

Assessing Brutal Meme Stock Damage
Meme stock pain is reaching levels their fans haven't seen before.

A custom market-cap weighted index of the 25 stocks topped out on Feb. 9. And since then it has collapsed by more thtan 50%. Much of that pain has happened in just the last four weeks, with the index dropping roughly 25% in that time.

Some of the individual stocks have done much more poorly. Robinhood is among the worst of them all, plunging 37% in just a month. That loss alone cost investors more than $6 billion in just a month.

GameStop, too, is gobbling up speculators' quarters fast. The original meme stock is down 43% in a month, sucking more than $5 billion out of investors' portfolios in that time.


What's Next For Meme Stocks Vs. The S&P 500?

Fans of meme stocks might point out they're down but not out. But that's not necessarily true. A number of stocks in the meme index are literally out now, like Penn National Gaming (PENN). It was removed from the Meme ETF on top of sinking 67% from the meme high.

Worse yet, these stocks are lagging the S&P 500 by a mile now.

Take theater chain AMC Entertainment. It's still up huge, 177%, from the meme peak. But in just one month shares are down more than 49% to 15.27, making it the No. 2 worst-performing meme stock. That's much worse than the S&P 500's 7.6% fall in that time.

And that's the point. Meme stocks are now lagging the market since Jan. 1, 2021, which even includes the impressive gains from the start of last year. The index of the 25 meme stocks is now down 27% since the start of last year. Had you just bought the S&P 500, you'd be up much more than 20%. And that doesn't even include the S&P 500's 1.4% dividend yield. Investors generally do much better by following sound investing rules.

Now that's a tough lesson to take.

Meme Stocks Are Crashing

All but two of the 25 top meme stocks dropped in the past month

Company Symbol 1-mo. % ch. Market value change one month ($ millions)
Affirm Holdings (AFRM) -51.7% -$15,045.0
AMC Entertainment (AMC) -49.6% -$7,724.8
Virgin Galactic (SPCE) -46.8% -$1,764.8
GameStop (GME) -42.5% -$5,104.1
DraftKings (DKNG) -41.5% -$5,107.1
Rivian Automotive (RIVN) -40.1% -$34,941.3
Roblox (RBLX) -39.2% -$23,306.8
Block (SQ) -38.1% -$29,596.0
Robinhood Markets (HOOD) -37.9% -$6,172.7
Roku (ROKU) -37.9% -$11,798.4
ContextLogic (WISH) -37.3% -$848.8
Palantir Technologies (PLTR) -36.0% -$13,637.8
Sundial Growers (SNDL) -33.4% -$429.5
Tilray Brands (TLRY) -32.7% -$1,259.9
Peloton Interactive (PTON) -31.0% -$4,005.3
Beyond Meat (BYND) -20.6% -$917.0
Cassava Sciences (SAVA) -19.5% -$341.3
SoFi Technologies (SOFI) -18.4% -$2,219.5
Cleveland-Cliffs (CLF) -18.1% -$1,800.3
Bed Bath & Beyond (BBBY) -16.4% -$320.9
BlackBerry (BB) -14.8% -$6,855.3
Carnival Corporation (CCL) -8.4% -$1,646.5
Lucid Group (LCID) -5.4% -$3,391.5
ViacomCBS (VIAC) 3.7% $569.4
Digital World Acquisition (DWAC) 28.0% $528.1

Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz