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Why GameStop and AMC Stocks Jumped While Sundial Growers Dropped Today

By Howard Smith – Aug 30, 2021 at 12:02PM

Key Points

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Even a small amount of good news seems to reenergize the meme stock trading crowd.

What happened

Two stocks that originally ignited the meme stock trading category seem to be back in vogue with the retail trading crowd. In just the last five trading days, shares of GameStop (GME 3.46%) and AMC Entertainment (AMC) have jumped 29% and 19%, respectively. That sentiment continued Monday morning. After rising 6.5% early in the session, shares of GameStop were still 4% higher at 11:45 a.m. EDT. AMC stock jumped as much as 11% before paring gains to about 7% at that time. But not all meme stock names were being bought today. Shares of Canadian cannabis company Sundial Growers (SNDL 8.68%) were down almost 3%. 

So what

As the traders who have turned social media sites into groupthink engines for stock buying have shown previously, moves in these names don't necessarily correlate to any underlying business events. But in the case of AMC, a slow but steady return of movies and fans to theaters has at least provided some positive news for the company.  

red arrow down and green arrow up on top of stock sheet.

Image source: Getty Images.

Now what

A return to theaters is certainly good news for AMC. But the box office revenue on the most popular movies is still far below blockbuster levels seen pre-pandemic. This weekend's No. 1 film was horror film Candyman, and it grossed only $22.3 million in theaters. That still counted as good news for the struggling theater operator. But that still doesn't really explain the moves seen in AMC and GameStop this past week. 

AMC Chart

Data by YCharts

In fact, neither AMC nor GameStop has really told investors how it plans to turn itself around. AMC CEO Adam Aron has embraced his company's role as a meme stock, and the company has been catering to its retail base of shareholders. Aron has engaged directly on social media, and the company launched AMC Investor Connect, which it said is an "effort in relationship building" with its shareholders. 

The reality remains that the performance of these businesses isn't aligned with the stock valuations in many cases. Sundial Growers is still losing money, and though its gross cannabis revenue grew 8% sequentially in its recently reported second quarter, the company is still counting on an acquisition strategy to turn itself around. 

GameStop hasn't clued investors in to how exactly it plans to recreate itself as an online retailer. That hasn't kept meme stock traders from holding up the share price, however. Perhaps more about its strategy will be revealed when GameStop reports its second-quarter financial update on Sept. 8.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

GameStop Stock Quote
GameStop
GME
$27.52 (3.46%) $0.92
AMC Entertainment Stock Quote
AMC Entertainment
AMC
$8.17 (%)
Sndl  Stock Quote
Sndl
SNDL
$3.13 (8.68%) $0.25

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

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