Are Meme stocks Faraday Future and AMC A Buy?

🌟🌟🌟With escalating conflicts in the Middle East and disappointing Big Banks Q1 24 earnings report, it is not surprising that Meme stocks took a hit this week.

$AMC Entertainment(AMC)$  has dropped 5.3% on Friday and is down by 12% in the past week.  AMC has hit a new all time low of USD 2.61.  Ever since AMC announced that it is planning to sell another USD 250 million shares in order to pay down its debt, AMC shares have been sliding downwards. 

AMC has a total debt of USD 9.1 billion at the end of Q423.  Besides its worrisome debt obligations, uncertainty exists surrounding the company 's industry.  Since the Covid Pandemic, crowds have not returned to movie theatres in the same way prior to the pandemic.

The 2 bright spots have been Kung Fu Panda 4 and Dune Part 2.  Kung Fu Panda 4 took in USD 108 million domestically in its first 2 weeks at the box office in  March.  Dune Part 2 earned USD 81.5 million in the US and Canada over the weekend debut. 

AMC is also awaiting a May 2 court hearing where a judge will consider whether to finally approve the proposed USD 3.3 Million settlement from hedge fund Antara Capital.  The hedge fund originally faced a USD 20 million lawsuit from AMC shareholders for its profiting off a short swing involving APE equity units. 

After the current sell off, AMC is in no position to drastically reduce its debt and move to growth phase. 

On the technical front there is also no respite in sight for AMC other than the USD 3.60 support from early February. 

$Faraday Future Intelligent Electric Inc.(FFIE)$  is another meme stock having a tough time.  The stock has undergone 2 reverse stock splits within 5 months.  The latest was in March at a 1 for 3 ratio.  This comes after a cash crunch and supply chain woes  had wiped out nearly 99% of Faraday Future 's market value over the past year. 

Faraday Future has also received a delisting warning from Nasdaq  as its share price has fallen below the minimum USD 1 per share for the prior 30 days consecutive trading period from November 9 to December 27 2023.  This is the 2nd warning from Nasdaq. 

Faraday Future has problems in paying its rent and has just avoided getting evicted from its Los Angeles headquarters with an agreement on April 2 with its landlord Rexford Industrial as long as it met a few conditions.  

Faraday had to recall its all 11 units of its  FF91 SUV recently.  This is due to a problem with the warning light for airbags in FF91 SUV. 

The good news for Faraday is the establishment of a Middle East Sales Entity in Dubai on April 9.  With the entry into the Middle East,   Faraday will now operate under a 3rd pole geographic strategy that includes the US and China. 

Faraday signed strategic cooperation agreements with Master Investment Group and Siraj Holding LLC.  According to Faraday this expansion is aligned with its vision to revolutionise mobility through intelligent and connected EVs. 

Faraday said that it continues to engage with potential partners in the Middle East to explore opportunities, including strategic financing, business development, sales and marketing.  Faraday plans to launch a limited edition model, the FF91 2.0 Futurist aiFalcon, tailored to the Middle East market, with initial deliveries targeted in 2024.

The current price of the FF91 2.0 Futurist Alliance costs USD 309,000.  In addition to that, a subscription to FF aiHypercar+ which is Faraday Cloud Service will cost an additional USD 14,900 per year. 

At that price level, only the ultra rich can afford the vehicle.  Perhaps Faraday Future may receive a cash  lifeline from one of its Middle Eastern partners which it so desperate needs to stay afloat. 

At the last closing price of USD 2.65 for AMC and 8 cents per share for Faraday Future, it would seem to be a big bargain.  However fundamentally both stocks are fighting to stay afloat and in dire need of further cash injection to pay off their mounting debts. 

Are AMC and Faraday Future  a Buy?  I would recommend No unless a investor wants to become a Bag Holder which is someone who holds onto poor performing stocks. 

Instead it is much better to buy quality stocks such as $Microsoft(MSFT)$  $Alphabet(GOOG)$  that tick the core fundamentals of profitability, rock solid balance sheet and an excellent management team. 

As Warren Buffett likes to say Price is what you pay, Value is what you get.   

The meaning behind this quote is that price of a product is not always an indicator of its true value. 

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