WallStreetBets posters are buzzing about these eight Reddit stocks.
Reddit has become an unlikely stock trading hub in 2021. Online groups of retail traders have repeatedly orchestrated targeted buying campaigns in some of the most heavily shorted stocks in the market, creating viral social media memes and triggering massive short squeezes in their favorite “stonks.” Traders have created so much volatility in the market that Congress even held a hearing to better understand what is going on. At this point, meme stocks are among the best-performing stocks of the year, but come with real risk. Here are eight Reddit stocks generating the most buzz on Reddit’s WallStreetBets page in September, according to Swaggy Stocks.
Clover Health Investments Corp. (ticker: CLOV)
Clover Health is a data-driven health insurance company backed by influential venture capitalist Chamath Palihapitiya. Palihapitiya has an excellent track record of special-purpose acquisition company mergers, but Clover has been a big disappointment. Clover’s SPAC traded at around $10 when the Clover merger was announced in late 2020. After dropping down to $6.31 in March 2021, meme stock traders sent Clover soaring as high as $28.85 in June. Unfortunately, the short squeeze didn’t last long, and Clover is now back down below $10. Reddit traders are hoping Clover has another short squeeze left in it in September.
GameStop Corp. (GME)
GameStop is the original meme stock and was the first stock that put Reddit on Wall Street’s radar. While GameStop shares are well off their all-time highs of $483 during a massive January 2021 short squeeze, the stock remains up more than 1,000% year to date. GameStop’s short interest is down nearly 90% so far in 2021, but Reddit is still buzzing about sending GameStop “to the moon.” Unfortunately, the brick-and-mortar video game retailer’s annual revenue peaked back in 2012, and it reported a net loss of $673 million in 2019 even before the health crisis. Nevertheless, Reddit traders still like the stock.
Alibaba Group Holding Ltd. (BABA)
Shares of Chinese e-commerce and cloud services leader Alibaba have been crushed in 2021 after Chinese regulators cracked down on the company and its tech peers. It all started when China canceled the potential $37 billion initial public offering of digital payment giant Ant Group in late 2020. Alibaba holds a roughly 33% ownership stake in Ant. China has subsequently hit Alibaba with multiple antitrust fines. Reddit traders may be optimistic that the crackdown will eventually wane and the company’s $23 billion in annual net profits and more than 30% revenue growth will eventually carry the stock higher.
DocuSign Inc. (DOCU)
DocuSign wowed the market with its second-quarter earnings report, silencing critics who attributed much of its impressive 2020 growth numbers to the work-from-home environment. DocuSign reported 50% second-quarter revenue growth and issued third-quarter and full-year guidance ahead of analyst estimates. DocuSign’s core eSignature business is booming, and the company hopes to convert many of its eSignature customers to Agreement Cloud services subscribers. The company’s net dollar retention rate suggests Agreement Cloud is gaining traction. DocuSign stock has an extremely steep valuation, priced at 134 times forward earnings and 34.6 times sales. However, Reddit traders are undeterred.
Virgin Galactic Holdings Inc. (SPCE)
Virgin Galactic is the commercial spaceflight company backed by charismatic billionaire founder Richard Branson. Virgin has been popular on Reddit throughout 2021, but its shares soared when the Federal Aviation Administration granted the company a space-launch license in June. Branson eventually won the billionaire space race, beating Tesla Inc. (TSLA) CEO Elon Musk and Amazon.com (AMZN) founder Jeff Bezos to space aboard a Virgin Galactic test flight in early July. Unfortunately, the FAA recently grounded Virgin’s Unity spacecraft as part of an investigation into Branson’s test flight. Reddit may see the investigation-driven sell-off as a longer-term buying opportunity.
SoFi Technologies Inc. (SOFI)
SoFi is a financial technology company that specializes in student, personal and home loans, along with investing and money management. The company is also backed by Palihapitiya, who helped take the company public via a SPAC merger on June 1. Unfortunately, SoFi shares are down more than 20% since its merger. The company didn’t help its case in August when it reported a $165.3 million net loss in the second quarter. Reddit traders may be looking past the losses and may see the sell-off as a buying opportunity as the company reported 113% member growth in the quarter.
Apple Inc. (AAPL)
Reddit users have a reputation for betting on unprofitable, high-risk meme stocks. However, Apple is a glaring exception. Apple is a high-quality, blue-chip stock that generated $57.4 billion in net income in 2020. Apple’s biggest overhang in the near future may be regulatory pressures. The company recently loosened its App Store rules, allowing some app makers to direct users to subscribe to third-party services without charging a 15% to 30% gross sales fee. So far, antitrust regulations haven’t hit Apple’s growth numbers too hard. The iPhone maker reported 36.4% revenue growth in the most recent quarter.
Tesla Inc. (TSLA)
Tesla and controversial CEO Elon Musk are two of the most divisive subjects on Wall Street, so it’s no surprise that Reddit has been buzzing about Tesla throughout 2021. Tesla hit an all-time high of $900 earlier this year after a huge multiyear rally, but the electric vehicle stock is now trading at 105 times forward earnings and 17 times sales. Tesla is valued at $726 billion despite revenue and profit numbers that pale in comparison to leading legacy automakers. Tesla bulls say the company will eventually grow into its valuation, but bears understandably remain skeptical of Musk’s promises.
Reddit stocks trending in September:
— Clover Health Investments Corp. (CLOV)
— GameStop Corp. (GME)
— Alibaba Group Holding Ltd. (BABA)
— DocuSign Inc. (DOCU)
— Virgin Galactic Holdings Inc. (SPCE)
— SoFi Technologies Inc. (SOFI)
— Apple Inc. (AAPL)
— Tesla Inc. (TSLA)
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Update 09/07/21: This story was originally published at an earlier date and has been updated with new information.