Cramer warns of ‘meme stock mania’, says sell GameStop and AMC

CNBC’s Jim Cramer said investors should get out of stocks like Stoppage of play And AMCboth of which saw huge rallies this week sparked by social media.

“When I see the meme stock mania taking over, led by GameStop and AMC, I have to remind you that it’s irrational,” he said. “It is not possible for these stocks to reach such high levels on their own.”

AMC and GameStop soared after “Roaring cat,” the man who contributed to GameStop’s massive short squeeze in 2021, posted online for the first time in about three years. Shares of both companies rose more than 70% on Monday, and although both closed higher on Tuesday, enthusiasm for stocks began to wane.

For Cramer, GameStop is overvalued compared to its electronic retail peers. He said Best buy has a much stronger business than GameStop, even though the two companies have comparable market caps after the latter’s huge run. Cramer pointed out that GameStop’s 2023 profits were much lower than Best Buy’s, even though Best Buy’s profits were down.

But while GameStop may simply be overvalued, AMC’s situation is different, according to Cramer. Even though the theater chain managed to raise $250 million this week as its shares posted huge gains, he said it could run out of money by 2026 when its debt of more than $2 billion of dollars will expire. He called AMC a “walking dead man.”

“You’re catching AMC in the swing of things,” he continued. “Sell it before the dead man’s phase and you’ll be just fine.”

GameStop and AMC did not immediately respond to requests for comment.

Register now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer The CNBC Investing Club Charitable Trust owns shares of Best Buy.