- Jim Cramer says there’s no way meme stocks like GameStop (GME) and AMC Entertainment (AMC) should be trading at such elevated levels based on their fundamentals.
- Cramer recommends selling GameStop, stating he can’t see it trading at $64 or even $44, calling it the “responsible move.”
- While acknowledging AMC’s stronger financial position, Cramer expresses concern about its heavy debt burden and warns of potential future dilution if the stock price keeps rising.
Jim Cramer weighed in on the recent rally in meme stocks like GameStop and AMC, warning investors that the moves are irrational and advising them to sell.
Cramer: Current Valuations Make No Sense
Cramer said there is no way GameStop and AMC should be trading at such high valuations based on fundamentals alone. He noted GameStop briefly reached a $20 billion market cap this week, calling the current prices “exotic.” Ultimately, Cramer said “it’s worth what they will pay for it” as investors continue to bid up meme stocks.
Cramer Compares Valuations in the Industry
To demonstrate how inflated GameStop’s valuation is, Cramer compared it to Best Buy. Despite having significantly higher revenue, Best Buy’s market cap is only $16 billion – near GameStop’s peak. Cramer advocates comparing valuations within an industry to gauge what’s rational.
Cramer Advises Selling GameStop
Given GameStop’s disconnect from fundamentals, Cramer strongly recommends selling the stock. He said he “can’t see GameStop trading at $64 or even $44.” Cramer called selling GameStop the “responsible move.”
AMC Viewed Differently Due to Debt Burden
While bearish on GameStop, Cramer sees AMC differently. He pointed to AMC’s heavy debt load, especially the $2.6 billion due in 2026. Cramer warned AMC may continue diluting shares if the stock keeps rising. However, he said the company can shore up cash while the stock remains elevated.
Conclusion
In the frenzied meme stock environment, Cramer argues current prices defy logic. He advises investors take profits in GameStop, but sees more upside potential for AMC. Still, Cramer warns the AMC rally is on borrowed time.
