After a pause for a few months, the hype around meme stocks has returned, with individual investors wading back into the stock market after laying low through the worst of this year’s selloff. Shares of many stocks discussed on several social media platforms have spiked over the past couple of months, with retail investors’ craze to bet on them regardless of their fundamentals.

However, the rally was short-lived as the stocks have fallen significantly of late. Despite the remarkable gains from the short-lived rallies, the meme stocks usually have an awful ending as the rallies are not backed by strong fundamentals or positive news.

With inflation far from being eased, the prospects of aggressive interest rate hikes by the Fed will keep the market under pressure in the foreseeable future.

Therefore, it could be wise to avoid meme stocks Palantir Technologies Inc. (PLTR), GameStop Corp. (GME), and Bed Bath & Beyond Inc. (BBBY), given their weak fundamentals and bleak growth prospects.

Palantir Technologies Inc. (PLTR)

PLTR builds software platforms that help organizations integrate their data, decisions, and operations at scale. The company operates through two segments: Commercial and Government. It has built three principal software platforms: Palantir Gotham, Palantir Foundry, and Palantir Apollo.

PLTR’s adjusted income from operations declined 7.6% year-over-year to $107.85 million for the second quarter ended June 30, 2022. Its adjusted EBITDA decreased 7.2% year-over-year to $112.74 million. 

The company’s adjusted net loss came in at $21.12 million, compared to an adjusted net income of $97.95 million a year ago. Also, its adjusted loss per share amounted to $0.01, compared to an adjusted EPS of $0.04 in the prior year period.

Analysts expect PLTR’s EPS for the quarter ending September 30, 2022, to decline 57.3% year-over-year to $0.02. It has failed to surpass Street EPS estimates in three of the trailing four quarters.

Over the past year, the stock has declined 70.9% to close the last trading session at $7.63.

PLTR’s weak prospects are reflected in its POWR Ratings. It has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an F grade for Sentiment and a D for Value and Stability. It is ranked #19 out of 25 stocks in the F-rated Software – SAAS industry. Click here to see the other ratings of PLTR for Growth, Momentum, and Quality.

GameStop Corp. (GME)

GME provides games and entertainment products through its e-commerce properties and various stores in the United States, Canada, Australia, and Europe. It sells new and pre-owned video game platforms and software, accessories, and in-game digital currency.

GME’s gross profit declined 12.1% year-over-year to $282.20 million in the second quarter ended July 30, 2022. The company’s selling, general and administrative expenses increased 2.3% year-over-year to $387.50 million. Its adjusted operating loss widened 106.6% year-over-year to $106.20 million. 

In addition, its adjusted net loss widened 94.7% year-over-year to $107.10 million. Also, its adjusted loss per share widened 84.2% year-over-year to $0.35.

Analysts expect GME’s EPS to remain negative in the quarter ended October 31, 2022. It failed to surpass Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 43.5% to close the last trading session at $28.13.

GME’s weak fundamentals are reflected in its POWR Ratings. It has an overall D rating, equating to a Sell in our proprietary rating system. It has an F grade for Stability and a D for Sentiment and Momentum.

GME is ranked #44 of 46 stocks in the Specialty Retailers industry. Click here to see the other ratings of GME for Growth, Value, and Quality.

Bed Bath & Beyond Inc. (BBBY)

BBBY is an omnichannel retailer offering a range of domestic merchandise such as bed linens, bath items, kitchen textiles, home furnishing items, and various juvenile products. The company sells its products through its website and under ten brands: Bee & Willow, Marmalade, Nestwell, Haven, Simply Essential, Our Table, Wild Sage, Squared Away, Studio 3B, and H for Happy.

In the fiscal first quarter that ended May 28, 2022, BBBY’s net sales decreased 25% year-over-year to $1.46 billion. Its gross profit declined 44.9% year-over-year to $349.31 million, while its operating loss widened 371.9% from the year-ago value to $339.16 million. BBBY’s adjusted net loss came in at $225.23 million, compared to an adjusted net income of $4.93 million in the year-ago period.

Also, its adjusted EBITDA loss came in at $223.54 million, compared to an adjusted EBITDA of $86.07 million in the same quarter last year. The company’s adjusted net loss per share amounted to $2.83, compared to an EPS of $0.05 in the prior year period.

Analysts expect BBBY’s estimated loss per share to be $1.80 for the quarter ended August 31, 2022. Its consensus revenue estimate is expected to decline 22.7% year-over-year to $1.45 billion in the to-be-reported quarter. BBBY has missed the consensus EPS estimates in three of the trailing four quarters.

BBBY has declined 63.2% over the past year to close the last trading session at $8.76.

BBBY’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which translates to Sell in our proprietary rating system. It has an F grade for Stability and Sentiment and a D for Growth and Momentum.

BBBY is ranked #58 of 62 stocks in the Home Improvement & Goods industry. Click here to see the other ratings of BBBY for Value and Quality.

PLTR shares were trading at $7.99 per share on Thursday afternoon, up $0.36 (+4.72%). Year-to-date, PLTR has declined -56.12%, versus a -16.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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