3 High-Risk High-Reward Stocks for 2024

The significant improvement in inflation has raised hopes that the Federal Reserve will cut rates soon. Fed Chair Jerome Powell appears cautiously optimistic about the situation but treading carefully before slashing rates.

Recently, meme stocks saw a resurgence but did not outshine the 2021 rise. So, this might be the time to spotlight some high-risk, high-reward stocks for 2024.

GameStop Rides on Roaring Kitty’s Coattails

Meme king GameStop (NYSE:GME) is once again on a rollercoaster ride after its famous rise and fall during the social media-influenced popularity. In May and early June, GameStop stock rallied and crashed just as it did a few years ago.

Remarkably, the stock is up 44% year-to-date but does that mean the company has finally turned a page and has become a stalwart?

In the first quarter of fiscal 2024, GameStop’s top line figure contracted by 29% to reach $881.80 million, with a pullback across all its segments. The company incurred $295.1 million in selling, general, and administrative (SG&A) expenses representing about 33.5% of net sales.

There was a contraction in the adjusted bottom-line losses and the company also appears to be burning cash. Its free cash flow stood at -$114.70 million for the last reported quarter.

Make no mistakes about it that the rally in GameStop is not based on fundamentals. The real reason is that it was speculated that investor Keith Gill (“Roaring Kitty”) was holding a huge position in the beleaguered video game retailer. He was also instrumental in the 2021 rally as well.

GameStop’s stock also faced a pullback as Gill faced “pump and dump” accusations. The company has taken advantage of this sudden rally by raising $2 billion in a stock sale, intending to use the money for general corporate purposes but this dilution might not sit well with existing shareholders.

GameStop’s valuation is still elevated. Its price sits at 270x forward earnings, which is significantly stretched. Wall Street analysts are still expecting a 54.9% downside in the stock. On the other hand, the stock is still up by 1,665.9% over the past five years and might be just another meme post away from skyrocketing.

AMC Entertainment Raises Cash As Price Spikes

AMC Entertainment (NYSE:AMC) has had a different fortune this year with the stock falling by 87% over the past twelve months.

The company is the largest movie exhibition firm, owning approximately 10,000 screens around the world but in spite of the poor yearly performance, it too benefited from the recent hype in former meme stocks.

How has the recent rally helped AMC? Well, just like GameStop, the company sold 72.5 million shares as an at-the-market equity offering, raising $250 million of new equity capital. This might help reduce its debt burden. It remains to be seen how much this move can impact AMC’s operations.

Bloomberg reported that AMC Entertainment is having confidential talks with some of its lenders about lowering its debt load and extending near-term maturities. As the company faces a significant debt load, pushing back its 2026 maturities has been very important.

Overall, this short rally might help the company avoid bankruptcy. Still, a dilution of stock has occurred, and it may not sit well with investors.

For the first quarter of fiscal 2024, AMC’s total revenues declined marginally from the prior year’s period to $951.4 million. The big budget releases this year probably helped the company’s bottom line given that the net loss (on a GAAP basis) declined by 72% year-over-year.

Coming back down from its 2021 meme-led high has helped the stock attain a cheap valuation. AMC’s share prices sit at 0.40x its forward sales. This is lower than the current industry average. But if we look at the price multiple compared to its forward cash flow, the story flips on its head. The forward price/cash flow is 95.32x, which is quite stretched. Wall Street analysts see an 11.7% downside in the stock.

Branson Refuses to Invest More In Virgin Galactic

Space travel is becoming ever more popular but a tough macroeconomic environment is not supporting speculative investments. Against that backdrop, Virgin Galactic (NYSE:SPCE) is not having a great time with the stock down 90% over the past year alone.

The company went public in 2019 and enjoyed some bullish momentum for a while on high hopes for expansion. But Virgin Galactic does not have fundamentals to mirror initial investor enthusiasm. It has not had GAAP-based annual net income since 2019. The primary reason for this appears to be the company’s heavy investments in research and development.

For the first quarter of fiscal 2024, Virgin Galactic reported revenues of approximately $2 billion. This is significantly larger than what it had reported a year earlier. This revenue was driven by commercial spaceflight and membership fees related to future astronauts. Profits were still elusive, though but the company believes its cash position to be strong.

Late last year, Virgin Galactic’s founder, Richard Branson, revealed that he would not be making further investments in the company, which created an air of uncertainty.

And this year, Virgin Galactic has entered into a flying hiatus. It retired its flagship suborbital spaceship, VSS Unity, in hopes of better offerings, like its next-generation Delta ships, currently set for a 2026 launch.

Meanwhile, the company remains a highly volatile investment. Its 1-for-20 reverse stock split to increase the per share market price to meet the minimum per share bid price requirement for continued listing on the NYSE has not helped.

Its price is sitting at 27x its forward sales, which is a lot more stretched than the industry average. Currently, Wall Street analysts have hefty expectations that the stock will climb more than 450%.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.