No investor wants to end up holding the bag following a bad investment. Yet, that is a very common scenario for those who choose to invest in meme stocks. The allure of quick, easy and outsized gains has caused more pain than joy.
The relatively new phenomenon of meme stocks gained notoriety during the pandemic. These days, it is less prominent than it was during the tail end of the easy money era.
Again, many investors have been burned. Those investors who do not want to end up among their ranks should steer clear of meme stocks as a general rule. More specifically, these three are meme stocks to avoid.
Mullen Automotive (MULN)
Mullen Automotive (NASDAQ:MULN) is a particularly dangerous meme stock currently. The company just received Nasdaq minimum bid price compliance from the exchange.
It’s particularly dangerous to investors because it sends the signal that the EV maker is more stable than it was previously. The company still has to hold an annual meeting to further regain compliance with Nasdaq policy.
In any case, what’s important to note here is that Mullen Automotive regained compliance through a successful 1-for-100 reverse stock split. None of this changes the fact that Mullen Automotive is ranked among the bottom 10% of automotive manufacturers.
Further, MULN shares continue to rapidly depreciate. In fact, they’ve lost nearly 50% of their value since the beginning of January. Moreover, it is difficult to even keep track of just how much share value has slipped, given how rapidly the decline has progressed.
Investors should simply realize that Mullen Automotive won’t establish itself as a name in the EV space. It will continue to be a meme stock and march lower in price.
AMC (AMC)
At the beginning of January, Barron’s ran an article about AMC (NYSE:AMC). It noted that AMC stock had fallen to an all-time low after a particularly gruesome 2023. Shares then traded for just under $6. Fast forward a few weeks, and those shares are now approaching $4.
Momentum is not in its favor. Furthermore, the move is indicative of the long slow death of AMC stock, once one of the biggest names in meme shares. AMC is also dangerous to investors given the fact that analysts are somewhat bullish. The lowest price target for AMC’s shares in 2024 is $5. The consensus average is $7.75.
As bullish as that sounds, investors should also consider that AMC issued 48 million additional stocks in December. Those shares were offered at the market pricing of $7.29. Plenty of pundits sang AMC’s praises at that time as well. However, the longer story holds: AMC stock continues to head toward zero after its heyday during the pandemic.
Nikola (NKLA)
Nikola’s (NASDAQ:NKLA) legacy will not be one of success. The company and its stock have long been plagued by trouble. It has now passed its defining scandal with Trevor Milton sentenced to a four-year prison term. The company isn’t the same one as when it began, but one that continues to have serious trouble.
Investors don’t have to look any further than the company’s latest earnings report. Nikola shipped three vehicles during the third quarter. That was a substantial decline relative to the 63 trucks it shipped during the same period a year earlier.
That resulted in a net loss of more than $425 million during the quarter. There is really nothing positive about the earnings report. Losses are compounding, and truck shipments are declining — steeply. The company lost more than $812 million during the first 9 months of 2023, substantially more than a year prior. Further, its trucks have been recalled, only adding to its issues.
On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.