GameStop and AMC logos
Source: GameStop Facebook, AMC Theatres Facebook

GME or AMC: Which Is a Better Stock to Buy in Short Squeeze 2.0?

By

May. 28 2021, Published 12:38 p.m. ET

Reddit meme stocks are rallying again, except the script is a little different this time. AMC Entertainment (AMC) is leading the surge and not GameStop (GME). AMC stock has climbed more than 150 percent in the past week and its YTD gains shot up as much as 1,500 percent on May 28.

Article continues below advertisement

A repeat of the January short squeeze appears to be playing out again. Retail investors made good money in the January squeeze even with little capital. In short squeeze 2.0, should you bet your money on GameStop or AMC? 

GameStop (GME) stock short interest

GameStop stock carries a short interest of 22 percent, according to Fintel data. That's significantly higher than the 5 percent average for U.S. stock. The stock is still sharply below the 140 percent short interest in GameStop when the stock became the face of the January short squeeze.

Article continues below advertisement
gamestop stock short squeeze
Source: GameStop Facebook

GME short squeeze 2.0

GameStop’s current short interest is still high enough that it can monetize another round of short squeeze. The previous squeeze drove GME stock up as much as 1,600 percent. The meme stocks that rose alongside GameStop in the January squeeze are rallying again. 

Article continues below advertisement

In what looks to be short squeeze 2.0, AMC Entertainment (AMC) is the star this time with the stock up more than 150 percent in the past week compared to GameStop’s 40 percent. Express (EXPR) and BlackBerry (BB), retail investors' other favorites on Reddit, are up 50 percent and 30 percent in the past week, respectively. 

Will GME stock go up like AMC?

GameStop and AMC are both rising as short squeeze 2.0 unfolds. However, AMC is sprinting faster than the associated group of meme stocks. Also, AMC has surpassed GME as the most popular stock on WallStreetBets, the Reddit community that engineered the January squeeze. While GME has a chance to rise more, its rally in the current squeeze might not be to the magnitude of the previous one. 

Article continues below advertisement

Also, it’s worth noting that Tesla CEO Elon Musk and Social Capital boss Chamath Palihapitiya fueled the previous squeeze. They haven't shown up in the current event yet. They have made it clear that they don’t like the idea of shorting stocks.

Article continues below advertisement

GME stock forecast

Wall Street doesn’t believe GameStop is worth $250 per share like the market currently values it. The stock carries a bearish price forecast. The average target price of $23 implies a 90 percent downside potential from the current price. Even Wall Street’s top target price of $39 points to a sharp downside. 

Article continues below advertisement

GME or AMC: Which is a better stock to buy now?

GameStop runs a videogame retail business, while AMC operates a network of movie theatres. Fundamentals have taken a backseat in the rally of GME and AMC. As speculative bets, AMC looks to have a greater upside potential than GME in a squeeze given its higher short interest of 30 percent versus 22 percent for GME.

If you’re looking to go deeper than the short squeeze, there's more going for these meme stocks. First, they have both taken advantage of their surging share price to try to strengthen their balance sheets through equity sales. Now, they are focused on investing the money to drive long-term value for investors. 

For example, GameStop is doubling down on ecommerce to stay relevant for the digital era. The company is also getting into the red-hot NFT space. For AMC, the capital raise amid surging stock price helped it escape bankruptcy. The theatre chain’s business outlook could improve as vaccines allow people to resume normal life. Also, rumors have been swirling for a while that Amazon may be interested in acquiring AMC to expand its movie business.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.