A Blast From The Past

Almost as if we had taken a time machine back two years, AMC, Gamestop, and Bed Bath & Beyond popped back up in the news today. But not for great reasons. 🙃

First, we’ll start with AMC Entertainment. Last week, the company completed three efforts to pave the way for issuing new shares of stock: a 10-for-1 reverse split, converting $APE units into $AMC shares, and paying out a shareholder lawsuit settlement. And it’s wasting no time getting started. 

Just three weeks after getting court approvals to complete all of those actions, the company filed a new prospectus to sell up to 40 million shares of common stock. 💰

The filing said the proceeds will be used to improve liquidity and refinance and repay loans. With $9.5 billion of debt and lease obligations and business operations that are still below pre-pandemic levels, the company has little choice but to raise funds by diluting shareholders further. 🤷

Given investors have experienced significant losses investing in the company, its filing cautioned them against buying new shares. Bolded font in the risk factors section states, “…Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” ⚠️

Although largely expected, the news still sent $AMC shares down sharply on the day. Shares closed down 37% at new all-time lows. 📉

Meanwhile, GameStop experienced a wild after-hours session following its second-quarter results. An adjusted loss per share of $0.03 and revenue of $1.16 billion topped the $0.14 loss on $1.14 billion in revenues expected. 🎮

Driving the strength was a “significant software release” that helped drive software and collectible sales to 49% of total revenue during the quarter. However, the company didn’t provide any additional color on that and did not hold a conference call.

While investors are happy to see sales stabilizing and costs continuing to come down, questions remain about the company’s ability to drive sales growth. It can only cut costs so far, so eventually, it will need to grow sales to deliver earnings growth. But, its shift towards a more online model has been slow, with many leadership transitions in the process. 🐌

After an initial pop of 12%, $GME shares are up 7% after hours as investors process the news. 📈

And Overstock.com’s attempt to revive the online portion of Bed Bath & Beyond’s business is off to a rough start. 😬

The company said sales have seen a mid-teen percentage YoY decline so far in Q3. That also includes a low double-digit percentage decline since its new website launched on August 1st. However, executives remain optimistic and say the company’s top-line performance is improving steadily.

$OSTK shares fell 24% on the news as investors remain wary of the longer-term strategy.  😰

Restaurants have outperformed the rest of the retail space for the last couple of years. Driving that strength was consumers getting out of their houses, shifting their discretionary spending from goods to experiences as they “revenge spent” their way back into the world. 💸

But now, as the job market weakens and student loan repayments begin, some analysts expect consumer spending to be impacted. That could hurt discretionary sectors across the board, especially if inflation remains elevated. 

What does that mean for the restaurant industry? After significant outperformance from the group, one Wall Street analyst suggests it could be headed for rougher times ahead. ⚠️

Technician Carter Worth was on CNBC yesterday discussing the restaurant industry breaking down from a technical perspective. He pointed out that many prominent restaurant names like McDonald’s, Darden Restaurants, Texas Roadhouse, and others had peaked during the summer (July) and are now breaking their uptrend. 😰

He believes that the group’s relative underperformance is just beginning and that more weakness is likely ahead.

While Carter didn’t discuss the fundamentals potentially causing this move, it would make sense that the market is pricing in a slowdown at these companies as consumers’ discretionary income gets rebalanced. Wage growth is slowing, student loan bills are returning, and record-high prices for shelter and automobiles are placing significant pressure on people’s wallets. And when it’s time to cut back, unnecessary restaurant spending could be among the first budget items to go. ❌

We’ll have to wait and see if that’s the case. But for now, restaurant stocks are trading cautiously.

Biotech giant Moderna exploded to the forefront of investors’ minds during the COVID-19 pandemic, playing a pivotal role in bringing the mRNA vaccine to life so quickly. 💉

Its role in the pandemic helped propel its market capitalization from under $10 billion in 2019 to nearly $200 billion at its peak. But as the U.S. and other countries moved past the pandemic’s peak and into a more normalized environment, it’s struggled to maintain that valuation.

Since peaking in 2021, its valuation has tumbled 80% to roughly $40 billion as investors look towards its next act. And nothing makes that more apparent than the stock’s reaction to news about the company’s updated COVID-19 vaccine for new variants of the virus. 🧫

Today, the company said its new vaccine generated a strong immune response against a highly mutated omicron variant, BA.2.86. Yet the stock barely budged on the news, instead continuing its recent decline. While this is good news from a scientific perspective, it’s unlikely to drive the significant growth investors are looking for. Thus, the market’s response was lackluster. 👎

For now, traders and investors are focused on the clear downtrend the stock remains stuck in. After breaking to multi-year lows in August, prices recently retested broken support near $117 and are now continuing lower. The stock’s 63-day moving average (in purple) also indicates its quarterly price trend remains lower.

Hopes are the company can use its mRNA technology to create vaccines and treatments for other significant diseases. But without a clear catalyst to change things, many are looking elsewhere for opportunities. As such, sellers remain in control for now. 🤷