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As Markets Soar, Are These 3 Reddit Stocks Here to Stay?

By Dan Caplinger - Updated Mar 9, 2021 at 3:50PM

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A huge rise included some old favorites from earlier this year.

The stock market has fallen sharply over the past few weeks, so it was inevitable that at some point, market participants would see major benchmarks whip back upward. Tuesday morning brought that relief for bullish investors, accompanied by a significant decline in interest rates that showed at least some inflation fears appeared to get put to rest. As of 11:15 a.m. EST, the Dow Jones Industrial Average (^DJI 0.00%) climbed 285 points to 32,088. The S&P 500 (^GSPC 2.02%) jumped 72 points to 3,893, and the Nasdaq Composite (^IXIC 0.00%) skyrocketed 435 points to 13,044.

Plenty of beaten-down market leaders were among big winners on Tuesday morning, as growth stock investors reasserted their supremacy at least for a short while. More surprising for some, though, was that stock picks inspired by the Reddit group WallStreetBets were back in full force. In particular, GameStop (GME 9.35%), AMC Entertainment Holdings (AMC 10.16%), and Sundial Growers (SNDL -6.13%) were all higher by 5% or more.

The show goes on for AMC

AMC Entertainment's stock was up more than 6%, challenging the $10-per-share mark once again. The movie theater operator is getting caught up in optimism about the potential reopening of the economy as coronavirus vaccine deployment continues, but some stock analysts are also trying to figure out whether the company can take advantage of its popularity among investors.

Movie audience with people wearing 3-D glasses.

Image source: Getty Images.

Shareholders are looking forward to getting the latest read directly from AMC when it announces its quarterly financial results on Wednesday. To be clear, no one's expecting anything positive from the movie theater operator's backward-looking financials, which many see including a nearly 90% plunge in revenue and huge losses.

But AMC has taken many steps to shore up its finances, including a stock offering earlier this year and more recent term loan facilities covering the company's Odeon Cinemas subsidiary. Moreover, it's looking for authorization from shareholders at their annual meeting in May to boost the number of shares issuable from about 524 million to more than 1 billion, saying that it would give the company more flexibility with future capital-raising efforts.

AMC is far from the only play on an economic reopening seeing its shares soar right now. Yet it has achieved high-profile status due to Reddit groups, and AMC is likely to keep getting attention going forward.

Playing to win at GameStop

Meanwhile, GameStop added to its gains from Monday, rising another 21%. That took the stock to $235 per share, up from below $40 per share just three weeks ago.

The video game retailer has gotten another round of positive momentum after Monday's announcement that Chewy co-founder Ryan Cohen would take a more active role in leading GameStop's recovery efforts. As chair of a new strategic committee on the board of directors, Cohen and his team are looking to build up GameStop's ability to compete in cutting-edge technology as it seeks to make a transition away from a brick-and-mortar retail focus.

So far, GameStop hasn't made any serious moves toward raising capital through a secondary stock offering, and there are reasons why it might hold off on doing so even with the stock price rising so far. But the fundamental bullish argument presented by Keith "Roaring Kitty" Gill in congressional testimony is resonating with many on Reddit, and that could keep the stock price in play.

Sundial goes higher

Finally, Sundial Growers was up nearly 5%. The move comes on a pretty good day for the marijuana stock universe in general, with other, larger cannabis cultivators up anywhere from 5% to 8%.

Sundial is a favorite among small investors interested in cannabis because of its low share price and listing on the Nasdaq Stock Market. With federal law still listing marijuana as a controlled substance, most U.S. companies with connections to cannabis haven't been able to list their shares on major exchanges. Yet some popular brokerage companies don't allow their customers to trade in over-the-counter stocks that aren't listed on Nasdaq or the New York Stock Exchange.

Unlike GameStop and AMC, Sundial hasn't hesitated to tap the capital markets for additional money at regular intervals. That has created huge share dilution, and Sundial's board recently opened the door to further stock offerings in 2021 and beyond. That makes it hard to see Sundial's stock climbing higher for long, but some investors seem interested nevertheless.

Watch the fundamentals

It's hard to concentrate on business metrics when stocks are soaring one day and plunging the next. But by squarely looking at financials rather than share prices, you'll be able to avoid getting whipsawed and make a more informed choice about whether to add shares of Sundial, GameStop, or AMC to your portfolio.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$12.90 (10.16%) $1.19
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,223.42 (0.00%) $0.00
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,088.85 (2.02%) $80.84
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,662.79 (0.00%) $0.00
GameStop Corp. Stock Quote
GameStop Corp.
GME
$100.38 (9.35%) $8.58
Sundial Growers Inc. Stock Quote
Sundial Growers Inc.
SNDL
$0.44 (-6.13%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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