Stocks to sell

New York-headquartered Mind Medicine (NASDAQ:MNMD), sometimes informally known as MindMed, was largely unknown on Wall Street. Recently, however, Mind Medicine garnered attention because one meme-stock trader reportedly bought shares of MNMD stock. It would be hasty to jump into this trade, though, as Mind Medicine’s business fundamentals aren’t ideal.

Mind Medicine develops medical and/or mental health treatments based on psychedelic medicine. This may include, but isn’t necessarily limited to, dosing people with LSD and/or psilocybin (psychedelic mushrooms) in a therapeutic, supervised setting.

Perhaps Mind Medicine’s investors are hoping that LSD and magic mushrooms will be the “next cannabis.” But then, many people bought cannabis stocks in 2017 and are underwater in their investments now.

Will Mind Medicine succeed where those pot providers couldn’t? Check the company’s fiscal stats, and you’ll likely be skeptical of the “shroom boom” and Mind Medicine in particular.

MNMD Mind Medicine $0.82

What’s Happening with MNMD Stock?

Mind Medicine gained a Nasdaq listing on April 27, 2021. MNMD stock surged from $2.13 per share to a 52-week high of $5.77 that year. Fast-forward to late last week, however, and Mind Medicine shares traded at around 73 cents apiece.

So, it looks like Mind Medicine’s investors struggled with the same pop-and-drop trajectory that many cannabis stockholders did. Yet, on Aug. 18, MNMD stock suddenly shot up to $1.18. Was this based on a clinical milestone achieved by Mind Medicine, or perhaps a positive earnings report?

Not at all. Rather, Mind Medicine was mentioned in the Wall Street Journal and Financial Times because reportedly, a college student who made around $110 million trading Bed Bath & Beyond (NASDAQ:BBBY) stock also bought Mind Medicine shares.

Mind Medicine’s Financial Stats Don’t Inspire Confidence

In other words, Mind Medicine was swept up in the meme trade. However, Bed Bath & Beyond shares lost over half of their value on Aug. 18 and 19. Similarly, MNMD stock dropped to 85 cents during those two days and has continued dropping since.

Frankly, most investors shouldn’t try to make quick gains from these meme-stock targets. It’s a dangerous game to play and a hard one to win on a consistent basis. Instead, cautious investors should check Mind Medicine’s financials to determine whether it’s a fundamentally sound business.

As it turns out, Mind Medicine incurred a nearly $17 million net earnings loss during 2022’s second quarter. Also, the company’s balance of cash and cash equivalents dwindled from $133.5 million as of Dec. 31, 2021, to $105.7 million as of June 30.

This certainly wasn’t Mind Medicine’s first unprofitable quarter, and there’s another item of concern: the company’s board of directors recently approved a 1-for-15 reverse share split.

It’s often a worrisome sign when companies feel the need to enact reverse stock splits. This sometimes indicates that the share price has been on a steep downward trajectory, with little hope of recovering.

What You Can Do Now

Like the cannabis stock trade, the psychedelic medicine trade could end up disappointing a lot of eager investors. Even if you believe in the future of psychedelic medicine, though, it’s still not wise to bet your hard-earned money on MNMD stock.

The volatility risk of the stock is elevated, and besides, Mind Medicine’s bottom-line financials are subpar. Therefore, it’s wise to eschew meme stock mania for now and to refrain from investing in Mind Medicine.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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