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Meme stocks witness unusual rallies solely based on retail investors’ interest in them. Retail investors gather on social media platforms such as Reddit, Stocktwits, Twitter, and Facebook and bet on fundamentally weak stocks to trigger a short squeeze. As the skyrocketing rallies in these stocks have little to do with the fundamentals of the companies, they fail to sustain the high price levels they reach.
The meme stock mania, born during the peak of the COVID-19 pandemic, has recently returned after a pause for a few months, as evident from unusual rallies of certain fundamentally weak stocks. Since the surge in meme stocks is usually disconnected from the companies’ fundamentals, investors should shun them amid an uncertain market outlook.
The Consumer Price Index (CPI) for August rose 8.3% year-over-year. And the rampant inflation enhances the chances of the Federal Reserve maintaining its hawkish stance, pushing an already weakening economy into a recession. Thus, the stock market is expected to remain under pressure in the foreseeable future. This is a good enough reason to avoid the risk associated with meme stocks.
Hence, fundamentally weak meme stocks Robinhood Markets, Inc. (HOOD), AMC Entertainment Holdings, Inc. (AMC), and Bed Bath & Beyond Inc. (BBBY) are likely best avoided now.
Robinhood Markets, Inc. (HOOD)
HOOD operates a financial services platform in the United States. The company’s platform enables users to invest in stocks, exchange-traded funds (ETFs), gold, options, and cryptocurrencies. In addition, it provides learning and education solutions, including Snacks for business news stories, News Feeds that give access to free premium news from different sites, and first trade recommendations.

In August, HOOD announced its second round of layoffs this year, slashing 23% of its headcount by letting go of 800 employees, with marketing, operations, and product management functions of the firm being the most impacted. The company blamed the worsening of the economy, including inflation and the crypto market crash, which had reduced customer trading activity and assets under custody.
Financial services companies are also struggling with a shrinking active user base and increasing regulatory pressure. The monthly active users (MAU) declined 1.9% million sequentially to 14 million for June 2022, as consumers navigate an environment marked by high-interest rates and surging inflation.
For the fiscal 2022 second quarter ended June 30, 2022, HOOD’s revenues decreased 43.7% year-over-year to $318 million. Its operating expenses increased 21.8% from the year-ago value to $610 million. The company’s adjusted EBITDA was negative $80 million, compared to $90 million in the prior-year period.
In addition, the company’s net loss and loss per share attributable to common stockholders amounted to $295 million and $0.34, respectively.
The consensus revenue estimate of $353.60 million for the fiscal year 2022 (ending December 2022) represents a 24.7% decline from the prior-year period. The company’s loss per share is expected to come in at $1.14 for the current year. Furthermore, the company has missed the consensus revenue estimates in each of the trailing four quarters.
HOOD’s shares have slumped 21.4% over the past six months and 44.4% year-to-date to close the trading session at $10.26.
HOOD’s POWR Ratings are consistent with this bleak outlook. The company’s overall F rating translates to a Strong Sell in this proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HOOD has an F grade for Quality. It has a D grade for Value, Stability, and Sentiment. It is ranked #141 of 152 stocks in the F-rated Software – Application industry. Click here to learn more about POWR Ratings.
AMC Entertainment Holdings, Inc. (AMC)
AMC is a leading theatrical exhibition company that delivers distinctive and movie-going experiences. The company owns, operates, and has interests in theaters in the United States and internationally. It owns and operates more than 950 theaters and 10,600 screens.
In August, Cineworld Group, the second-largest British theater company in the world which owns Regal Cinemas, released a statement to the London stock exchange, stating that its liquidity is in doubt amid a disappointing moviegoing recovery from pandemic lows. Then, in the same month, the Wall Street Journal reported that the theater company was preparing to file for bankruptcy within weeks.
The news of Cineworld, AMC’s closest rival, filing for bankruptcy alarmed its shareholders because of the terrible industry dynamics.
AMC’s operating costs and expenses increased 59.5% year-over-year to $1.18 billion in the fiscal 2022 second quarter ended June 30, 2022. The company’s operating loss and net loss amounted to $16.10 million and $121.60 million, respectively. AMC’s adjusted loss per share came in at $0.20 for the second quarter.
Analysts expect AMC’s loss per share for the fiscal 2022 fourth quarter (ending December 2022) to worsen 138.6% year-over-year to $0.26. Also, the company’s loss per share for the current and next year is expected to come in at $1.10 and $0.54, respectively. The company has missed the consensus EPS estimates in each of the trailing four quarters.
The stock has plunged 49.6% over the past month and 65.4% year-to-date to close the last trading session at $9.18.
AMC’s POWR Ratings reflect this poor outlook. The stock’s overall D rating equates to a Sell in this proprietary rating system. AMC has an F grade for Stability and Sentiment.
Within the F-rated Entertainment-Movies/Studios industry, it is ranked #6 of 7 stocks. Click here to learn more about POWR Ratings.
Bed Bath & Beyond Inc. (BBBY)
BBBY operates a chain of retail stores. The company sells a range of domestic merchandise, home furnishings, and other juvenile products. The company owns more than 953 stores and offers its products through various websites and applications comprising bedbathandbeyond.com, bedbathandbeyond.ca, facevalues.com, buybuybaby.ca, and decorist.com.
BBBY’s Interim Chief Executive Officer, Sue Gove, stated, “In the quarter, there was an acute shift in customer sentiment, and since then, pressures have materially escalated. This includes steep inflation and fluctuations in purchasing patterns, leading to significant dislocation in our sales and inventory.”
In the fiscal 2023 first quarter ended May 28, 2022, BBBY’s net sales decreased 25.1% year-over-year to $1.46 billion, and its gross profit declined 44.9% from the year-ago value to $349.31 million. Its operating loss widened 371.9% year-over-year to $339.16 million. Its adjusted EBITDA loss amounted to $223.54 million, compared to an $86.07 million EBITDA reported in the prior-year period.

Furthermore, the company’s net loss and loss per share came in at $357.67 million and $4.49, widening 603% and 835.4% year-over-year, respectively.
Analysts expect revenues to decline 21.9% year-over-year to 1.47 billion in the fiscal 2022 third quarter (ending November 2022). The $1.49 consensus loss per share estimate for the ongoing quarter indicates a 496.2% worsening from the prior-year period.
Also, the company’s revenue and EPS for the current year (ending February 2023) are expected to decline by 22.3% and 539.3% year-over-year, respectively.
It’s no surprise that BBBY has an overall rating of D, which translates to Sell in the POWR Ratings system. It has a grade of F for Stability and Sentiment and a D for Growth and Momentum.
BBBY is ranked #58 among 62 stocks in the Home Improvement & Goods industry. Click here to learn more about POWR Ratings.

About the Author
Mangeet Kaur Bouns’ keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. She earned a bachelor’s degree in finance from BI Norwegian Business School. Mangeet is a regular contributor for StockNews.com.

The Japanese yen is the second largest component of the Dollar Index (DX). It occupies 13.6% of it.
The real interest rate differential is the main reason behind the current severe weakness of the yen. I have already visualized it for you in my earlier post in August.
The Bank of England (GBP, 3rd largest part of DX) and lately the European Central Bank (EUR, the largest component of DX) raised their interest rates significantly during the last meetings. The Bank of Japan (BOJ), the Japanese Central Bank has kept its negative rate of -0.1% since 2016. Moreover, it repeated that it would not hesitate to take extra easing measures if needed, falling out of a global wave of central banks tightening policy.
Why BOJ is so dovish? There are several reasons. One of them, the history of inflation as shown in the chart below.
Source: TradingView
Japan has had a chronic deflation since the 1990s after the asset bubble burst. We can see how short term spikes of inflation (orange line) into the positive territory were short-lived. The BOJ didn’t even touch the interest rate in spite of inflation that has soared to unseen levels of 3.7% in 2014. This time around, the inflation didn’t race to the same peak and as I wrote above, the BOJ thinks of an opposite – easing!

The BOJ governor Mr. Kuroda said in the summer “If we raise interest rates, the economy will move into a negative direction.” The Japanese Central Bank does not want to cause a recession as the economy is still fragile.
Maybe the next chart could clarify the logic of the BOJ.

The land of the rising sun has hoarded the giant government debt from circa 56% of nominal GDP in 1994 up to the current 231%. This indicator in the U.S. stands close to 140%. From this perspective, rising interest rates means growing expenses to serve the debt. This could demotivate the tightening.
Now, let us move to the comparison of the FX chart with the real interest rate differential.
Source: TradingView
The USDJPY (blue bars) accelerated higher with the rising real interest rate differential (red line) this year.
The Fed is not afraid to throw the U.S. economy into a recession, but the BOJ is, so the former makes unprecedented hikes of the interest rate. The next Fed move is expected this week and the only question is +0.75% or +1%.
I added an orange box on the chart to highlight the area where the negative gap will shrink from the current -3.1%. It could hit either -2.45% or -2.10%. This could charge another rally of the US dollar against the Japanese yen towards ¥150 per $1 and beyond.
I would like to complete the picture with the technical chart below.
Source: TradingView
The yen chart is just beautiful. The USDJPY is usually one of the clearest in terms of the structure among foreign exchange pairs.

Since 2011, we can highlight two large moves to the upside. The first move, marked as a blue AB segment, was completed in 2015. The following BC consolidation has emerged in the form of a Triangular Consolidation (purple trendlines). It took the market almost six years to shape this large structure, longer than the preceding AB move. This again confirms the tricky nature of corrections and its time consuming ability.
We are on the CD move now. It has a sharp angle, though it could last longer. This part will travel the same distance as the first move when it will reach ¥152.89. The yen should weaken 7% in this case. The next target is located at the 1.272x of AB segment at ¥166.56, which equals to 16.6% of dollar gain.
The nearest support is located in the valley of the preceding correction in ¥130. The 52-week simple moving average is located lower at ¥123.48. Both supports are too far, as the trend is sharp.

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Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Finding winners in the pharmaceutical sector is not an easy process. But it is potentially quite lucrative.
For the pharmaceutical companies themselves, the current environment for success is reminiscent of the Greek myth surrounding Sisyphus, whom the gods condemned to repeatedly roll a boulder up a hill—only to have it roll down again once he got it to the top—for all eternity.
Today’s pharmaceutical firms must use vast amounts of capital in search of a blockbuster drug, which can generate $1 billion or more in annual sales. But then, even when such a medicine is found, the benefits provided are fleeting: from the moment a drug makes it to market, the clock begins ticking on its patent exclusivity. Once this expires and generic copycats reach the market—typically within a decade or so—revenues for the original inevitably fall, and often quite rapidly.
Then, like Sisyphus, the companies climb the hill of developing blockbuster drugs again, investing anew in the whole risky and costly process of drug development.
If you are an investor in the sector, you want to focus on the companies that have drugs in their pipelines with blockbuster potential, as well as the funds necessary to propel them through several trial stages.

Since 2010, the global pharmaceutical sector has invested the equivalent of around one quarter of its revenues in drug development each year. The U.S. industry alone spent some $83 billion on R&D in 2019—when adjusted for inflation, that’s about 10 times what it spent in the 1980s!
So, which segments of the pharmaceutical industry (and which drug companies) are poised to come up with the next blockbuster drugs?
Precision Therapies
Recent advances in science are ushering in a new era of highly effective personalized medicines. So-called precision therapies are based on greater understanding of how diseases work on a molecular level. This translates to doctors being able to identify what treatments fit which patients, and why.
Precision therapies are tailored to fit specific groups of people. This means they will likely be highly effective. But can cutting-edge personalized medicines reach blockbuster drug status? The naysayers say the market size is too small…but they seem to forget that innovative drugs can command very high price tags.
Consider recent data from the drug price tracking service division of GoodRX (GDRX). It shows that, after 15 years on the market, the average drug with accelerated approval by the FDA underwent 15.4 price increases. Drugs subject to conventional approval saw 12.7 price increases in the same span of time.
Keeping an eye on the list of development-stage therapies expedited through the FDA’s approval processes can provide insight into which companies have potential blockbusters in the pipeline.
AstraZeneca (AZN)
One company that fits that profile is AstraZeneca (AZN), and here’s why it is so interesting…
The company specializes in one of the areas where personalized medicine is making great strides: oncology. It already has three blockbuster cancer drugs. Per Morningstar:
Overall, the company looks well positioned for growth with the recently launched cancer drugs carrying strong pricing power that should have an amplified impact on the bottom line. We expect the first-line lung cancer indication for Tagrisso combined with the likely gains in adjuvant lung cancer will drive peak sales above $9 billion annually. Also, cancer drug Imfinzi should gain share in Stage III lung cancer where treatment options are limited and the drug holds growing potential in other cancers. Additionally, BRCA-focused cancer drug Lynparza is well positioned to gain further market share in new indications.
And now, one of the company’s other treatments, Enhertu, is viewed by some as the next big thing. It has been granted five separate breakthrough therapy designations by the FDA: three for hard-to-treat types of breast cancer, and one designation each for lung and gastric cancers.
Enhertu is an antibody drug conjugate (ADC), a type of therapy that is designed to do minimal damage to healthy, non-cancerous cells. It works by attacking tumors that test positive for a protein called HER2, which is associated with worse disease outcomes.

Known as “biological missiles.” ADCs are part of the new generation of personalized cancer treatments that target tumors with specific features, or biomarkers. Some 12 ADCs have received regulatory approval to date, while more than 100 others are in various stages of development.
Wall Street analysts believe that Enhertu has the potential to become a key growth driver for AstraZeneca. Consensus estimates are that sales could reach $4.5 billion by 2026, up from a negligible level now.
AstraZeneca’s Bright Future
The company had a relatively late start on emerging from the industry patent cliff that largely started in 2012. But today, AstraZeneca’s strong lineup of next-generation drugs should easily offset sales lost to new generic competition.
Morningstar says: “…we project the majority of new drug sales will be supported in therapeutic areas with strong pricing power with a heavy focus on differentiated oncology drugs Tagrisso and Imfinzi, Lynparza and Calquence.”
Annual sales growth over the next five years should in the 8% to 10% range as new products offset patent losses. Profit margins will expand too as high margin personalized drugs, particularly in oncology, will represent a larger proportion of overall sales over the next five years.
The stock is a buy anywhere in the $60 to $65 range.
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About the Author
Tony Daltorio is a seasoned veteran of nearly all aspects of investing. From running his own advisory services to developing education materials to working with investors directly to help them achieve their long-term financial goals. Tony styles his investment strategy after on of the all-time best investors, Sir John Templeton, in that he always looks for growth, but at a reasonable price. Tony is a regular contributor for InvestorsAlley.com.