Meme stock investors in for a ‘really rough’ ride, Miller Tabak’s Maley says

The meme stocks are totally on a roll, with AMC Entertainment Holdings Inc (NYSE: AMC) still up more than 2,000%, despite a significant decline in the past two days as the theatre chain expressed plans of issuing more shares.

Matt Maley’s remarks on CNBC’s “Trading Nation”

Miller Tabak’s chief market strategist Matt Maley, however, warns that the AMC frenzy will have a painful ending. On CNBC’s “Trading Nation”, he said:

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“These moves are so dramatic, and I think it’s a sign of froth in the marketplace. We’ve seen this huge amount of liquidity that the Federal Reserve has provided over the last year or so, and they’ve been telling us more recently that they’re going to taper back on that. As that liquidity becomes a little less plentiful, some of these stocks that are trading far beyond any of their fundamentals, are going to be really rough.”

The expert further highlighted that AMC’s RSI chart has gone into the high 90s two times in 2021 alone. For most companies, he added, it doesn’t happen twice in ten years. That’s sufficient evidence that things are immensely speculative at the moment.

“AMC is not so widely involved in the marketplace that it’ll cause a serious crash, but it will cause a pullback on the market, and that’ll be good and healthy because what’s going on right now is simply just not healthy, in my opinion.”

AMC has embraced its status as a meme stock

AMC Entertainment has embraced its new status as a meme stock and announced measures to laud retail investors, including postponing the annual shareholders meeting by over a month and launching a new portal, AMC Investor Connect, on its website that offers company updates and incentives like free popcorns and invitation to exclusive screenings.

On Thursday, AMC filed with the SEC to sell more than 11 million shares – a move that Professor Damodaran of NYU Stern School of Business considers justified as the theatre chain is in the business that is in transition. Tapping into the opportunistic moment and raising capital, therefore, will help it prepare for the change.

AMC Entertainment hit an intraday high of $56.40 per share on Friday but closed the regular session at a much lower $48 per share. In after-hours trading on Wednesday, the stock had soared to a record $70 per share. At the time of writing, AMC is valued at $24 billion.