Ever since last year’s raucously entertaining and (for some) massively profitable GameStop and AMC Entertainment short squeezes, investors have been looking for the next hot meme stock for quick returns.
This year continues to be a banner year for retail investors whose unexpected power to drive and impact markets has now been felt far and wide.
In total, more than 10 million new brokerage accounts were opened by individuals in 2020. Just in the first six month of this 2021, more than 10 million new retail clients jumped into the market.
Goldman Sachs noted that a few months after the GameStop saga, retail investors slowed down. But they picked up the investing pace again in May when this all turned into a meme-stock megatrend.
And now, both GameStop and AMS are back on the radar and have gained more than 1,000% and 2,600%, respectively, this year.
In May, during a five-day meme-stock rally, those two stocks cost short-sellers $930 million. Their losses extended into the following months, as well.
Here are 5 meme stocks worth watching for those looking to get in on this retail trading frenzy:
#1 GameStop (NYSE:GME) -- This Isn’t Over
The poster child of meme stocks, Gamestop, has seen another big rise in the past week, topping $209 per share at market close on Monday, August 30th:
For these meme stocks, there doesn’t have to be any fundamental background or special market event for a sudden surge. That said, there’s a lot of excitement swirling around GameStop’s Q2 earnings report, which is due on September 8. Some retail investors may be piling in again based on sentiment that Q2 earnings may impress.
But the fact remains that investors aren’t even aware of GameStop’s plans--including the make-or-break strategy for shifting from brick-and-mortar to online sales as a primary revenue generator.
#2 AMC (NYSE:AMC)--When Reality Is No Longer Reality
AMC is also popping again, presumably due to the fact that theaters have reopened and ticket sales are on the mend after a devastating pandemic shutdown. That shouldn’t be quite enough for a company that also hasn’t let investors know what’s supposed to come next.
The reality from Wall Street’s perspective is that this stock will lose big this year and continue to lose next year, too. And ticket sales alone won’t help it. There’s too much debt to deal with.
Again, this is all apparently irrelevant to retail meme traders:
#3 Palo Alto (NYSE:PANW)
Cybersecurity specialist Palo Alto Networks has its shares up 65% for the past 12 months, even though the company remains unprofitable. On top of that, the management expects fiscal 2021 revenue to increase by as much as 25%.
The average price target is $433.222, which means analysts expect the stock to rise by 10.40% over the next 12 months.
A steady stream of high-profile cyberattacks last year and this year indicates that cyber security companies will be busy.
Global ransomware attacks soared in 2020, a 158% spike in North America alone over the previous year. The total amount paid (at least that which was reported) was $350 million, a 311% increase over 2019.
From a fundamental market perspective, any cybersecurity company has potential right now, but why Palo Alto, specifically?
There is more to this one than GameStop and AMC in terms of fundamentals.
Most notably, Palo Alto’s Q4 earnings saw revenue rise 28% YoY and they ended up beating estimates by $50 million. In Q1 of fiscal 2022, the company is eyeing a 28% jump in revenue YoY.
#4 Peloton (NASDAQ: PTON)--The Ride of a Lifetime
This is a meme stock going in the other direction now.
Pelonton has greatly benefited from the pandemic, and also seized on the opportunity early by boosting sales and marketing expenses by over 50%, even with a bike price of $2,245 and the Pelton treadmill, $4,295.
Revenue skyrocketed 128% to $1.06 billion from $466.3 million a year earlier, topping expectations for $1.03 billion. The year-over-year sales increased 232% for the first quarter of its 2021 fiscal year and the company. Its connected fitness subscribers rose 135% to a record 2.3 million users.
But it’s got some problems, not the least of which are a government-mandated safety recall after treadmill-related deaths and then Peloton’s initial attempt to ignore complaints.
And Q2 earnings last Thursday didn’t exactly shine. Investors saw the company cut the price of its top-selling product by 20% but then spend a lot more on marketing.
Growth is clearly slowing and becoming less profitable. The meme-lovers will be expected to start fighting back now after this week’s loss.
#5 Robinhood (NASDAQ:HOOD) -- The Meme of Memes
Robinhood, the most popular trading app especially among novice and young traders, and especially for meme stocks, is also the newest meme stock itself.
Since it started its NASDAQ listing in early August saw its shares trading halted several times due to volatility. Yet, shares of the commission-free trading app surged nearly 50% in the first few days of trading.
Robinhood was also one of the most commented stocks during its IPO week on Reddit’s WallStreetBets channel, for better or worse. The subreddit members (the same ones behind the GameStop and AMC short squeeze) are still angry at the platform’s multiple outages and restrictions, which left them unable to trade their memes.
We still expect a lot of volatility to play on this one, for anyone who’s got meme fever.