A Meme Stock Is Born: How to Spot the Next Reddit Favorite

Of the 50 stocks that Robinhood originally put on its restricted list, roughly a third have doubled or more in price in 2021, while only six are lower year-to-date. Leading the pack is Naked Brand Group Ltd., whose shares are 546% higher this year. Koss Corp. is up 528% while GameStop shares are still hanging onto a gain of 317%. “So we’re all just going to ignore the $400B meme stock in the room?” Chanos said in a tweet.

All are available on our how to beat inflation with investments platform, so open a trading account to get started. The recent meme stock rise follows a similar surge in January, when activist investors perched on Reddit’s r/WallStreetBets board pumped struggling firms like GameStop and BlackBerry in a bid to hurt short-sellers. The wild trading is reminiscent of the GameStop mania of 2021 where a band of Reddit-obsessed retail investors managed to push up shares of the video game retailer and squeeze out short selling hedge funds.

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On the date of publication, Chris MacDonald did not have any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

While GameStop was the first successful meme stock, it was not the only one. WallStreetBets users quickly identified other downtrodden stocks with heavy short interest to boost. These included AMC Entertainment Holdings Inc. , the movie theater chain that saw flagging profits amid the COVID-19 pandemic, and Blackberry Limited , the outmoded smartphone maker. Much of the heightened activity has been attributed to so-called “meme” stock trading, when retail investors surge into popular low-priced equities, in many cases after seeing fundamental analysis posted online. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.

What exactly are meme stocks?

Shareholders should anticipate an update on financial results for the second quarter around the middle of August. During its Q1 earnings announcement in May, Nvidia projected that sales would increase by 24% on a year-over-year basis at the midpoint of the forecast. First, it is one of the pivotal tech players in the video gaming industry, which has the potential to generate a CAGR of nearly 15% by 2026, according to Market Research Future. Via its DGX systems, NVIDIA is also penetrating the artificial intelligence markets. Nevertheless, both the top and bottom lines for Tesla exceeded Wall Street expectations. Non-GAAP earnings rocketed by 57% to $2.27 per diluted share while revenue increased by 42% to $16.9 billion.

The meme-stock phenomenon, in which Reddit traders have been piling into one stock after another, shows no signs of slowing down. But even if the trend is here to stay, the length of each individual stock’s run can be fleeting, a CNBC analysis of market data shows. On average, Reddit stocks’ runs lasted nine trading days from the start to their first big drop during the initial frenzy in January, according to a CNBC analysis. Twitter and Reddit in particular are a good way to stay up to date with stock news and trending themes. Conversations on Reddit about highly manipulated stocks tend to evaporate quickly and seldom repeat, but several meme stocks have loyal, fervent fanbases. Founded in 2011, Snap is the parent company of the famous social platform Snapchat.

Travis Rehl shared how to tell the difference and which meme stocks have the most loyal fanbases. Now that you know more about the top Reddit meme stocks you should invest in right now, it’ll be much easier to make a smart, calculated, and profitable investment decision. Nio stocks reached their all-time high in January 2021, when a stock was worth around $62. Regardless, Nio is still among the top Reddit meme stocks to invest in 2022.

Is INVIDIA a Meme Stock?

If you don’t have any sort of underlying fundamental anchor or connection to a real business model or valuations, you’re taking huge risks, Trainer says. And David Trainer, CEO of investment research firm New Constructs says a “pump-and-dump scheme” is a fair way to characterize what’s going on here. Jenna Gleespen is a published author and copywriter specializing in personal and investment finance.

• It is also bound to be one of the few to benefit from the reopening of the economy as more people troop to cinemas and pay premium prices for concessions.
• That said, the number of retail investors who are interested in Microsoft and other mega-cap stocks is likely to increase meaningfully.
• These could include those in the rural areas, the company’s target market.
• Reddit meme stocks are a special form of digital stocks that attracted countless investors through social media and other online platforms.
• Meme stocks are shares of companies around which online communities have formed to promote and build narratives.

Currently, the company carries a Zacks Rank #2 , with earnings estimates moving higher across several timeframes as of late. GME shares were valued at roughly $5 (split-adjusted) per share at the beginning of January 2021, and after the month was over, shares closed at approximately $120 per share (split-adjusted), etching in a +1500% gain. Free Report) , also became a nightmare for short-sellers, causing violent price swings. You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

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It is important to remember that trading the meme stocks is for very aggressive traders with huge risk appetites. US Investors such as Dan Niles and Paul Nolte are predicting that US meme stocks will crash after announcements from the Federal Reserve in the second half of 2021, as it may decide to ease up on its monetary policies. This could lead to less liquidity within the stock market and less opportunities for short selling. Throughout May 2021, the company’s share price jumped by 570% to reach a peak closing price of $63.97.

The stock of Hertz fell from $6 to under a dollar amid waning interest and eventual delisting from the NYSE in 2020. However, the stock climbed back to over $6 when the company emerged from bankruptcy via auction, rewarding shareholders who stayed. He noted that while most will fail or at least “dramatically underperform,” “somewhere in this barrage of moonshots there will almost certainly be a few huge winners that leverage disruptive technology.” So-called meme stocks became a hot investment theme for day traders and retail investors early in 2021, resulting in short squeezes on hot stocks at the time such as GameStop Corp. and AMC Entertainment Holdings, Inc. .

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. Meme stocks often happened to be hard to borrow, with a high short interest ratio. GameStop followed suit in 2021, raising nearly $1.7 billion via a secondary offering of 8.5 million additional shares at an average price of more than $200 per share.

Please note that shorting restrictions may apply to individual shares on our platform. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

AMC Entertainment Holdings, Inc. (NYSE:AMC)

In all, the TLRY stock price has fallen nearly 89% since hitting its 52-week high on Feb. 10. It may seem like it’s best to follow the meme crowd’s lead, and forget about this stock completely. A short squeeze occurs when a stock moves sharply higher, prompting traders who bet its price would fall to buy it to avoid greater losses. As the price of the shorted stock rises, the short seller will begin to experience losses. These losses must be covered in a timely fashion, often prompted via margin calls, whereby the broker demands funds to make up for those paper losses. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price.

While no longer much of a https://1investing.in/ favorite, it doesn’t need association with this fading trend anymore. As it keeps on proving its skeptics wrong, expect things to continue to look up for Nokia and Nokia stock. Sign Up NowGet this delivered to your inbox, and more info about our products and services.

The company produced only $2.23 million in sales during the first quarter (it’s a $1.62 billion company, for context). Comparatively, operating expenses, including compensation, more than doubled, leading to a $7.39 million operating loss. That aside, ARKK stock has all the characteristics of a solid meme play that’s ready to be purchased in July.

In the late 1990s and early 2000s, these sites helped promote and drive up the prices of so-called dotcom stocks—a bubble that famously burst in spectacular fashion. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses.

Collectively, their independent actions have been shown to initiate short squeezes in heavily shorted names. As a result, meme stocks can become apparently overvalued relative to fundamental technical analysis. A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment.