Online social media platform Reddit became an unlikely stock trading hub in 2021. Groups of online traders in Reddit’s WallStreetBets community orchestrated targeted buying campaigns in a handful of the most heavily shorted stocks in the market, triggering huge short squeezes and generating unprecedented volatility in a handful of so-called meme stocks.
Robinhood Markets Inc. (ticker: HOOD) and other trading platforms were caught off guard by the meme stock mania and were forced to temporarily restrict buying of the most popular Reddit stocks, decisions that would prompt regulatory scrutiny and even a congressional hearing.
At this point, excitement surrounding the most trendy Reddit stocks of 2021 has died down, and most meme stocks are now trading well off their highs. However, a few popular Reddit stocks have maintained their extreme volatility, and their online army of social media supporters says it isn’t going away until the share prices of these stocks make it to the moon.
Unfortunately, the underlying businesses of some of the most popular Reddit stocks are struggling, and their volatile share prices and high valuations makes them high-risk, speculative investments. But for investors who understand the risks and can handle a bumpy ride, here are the eight Reddit stocks generating the most buzz on WallStreetBets in 2022, according to social media tracking tool Swaggy Stocks:
— Tesla Inc. (TSLA)
— GameStop Corp. (GME)
— Apple Inc. (AAPL)
— Amazon.com Inc. (AMZN)
— Advanced Micro Devices Inc. (AMD)
— ContextLogic Inc. (WISH)
— Twitter Inc. (TWTR)
— AMC Entertainment Holding Inc. (AMC)
Tesla Inc. (TSLA)
Electric vehicle maker Tesla and its controversial CEO Elon Musk are seemingly perpetually trending on social media. In recent months, the drama surrounding Musk and Tesla has had virtually nothing to do with Tesla’s business. Musk made a $44 billion buyout offer for social media platform Twitter priced at $54.20 per share back in April. He then sold about $8 billion of his Tesla stock as part of his efforts to fund the Twitter acquisition before officially backing out of the deal on July 11.
Tesla shareholders are likely annoyed with the distraction given a combination of Musk’s selling, COVID-19 shutdowns of Tesla’s Shanghai factory and a broad market rotation out of growth stocks has Tesla trading 40% below its 52-week highs. Tesla reported just 254,695 vehicle deliveries in the second quarter, well short of the 340,000 to 350,000 deliveries analysts had been expecting as recently as early April.
Meanwhile, even after the 2022 sell-off, Tesla’s stock still trades at about 45 times forward earnings estimates and 11.6 times sales, making it extremely steeply valued compared to other auto and large-cap tech stocks.
GameStop Corp. (GME)
More than any other stock, GameStop embodies the 2021 WallStreetBets meme stock mania. Reddit traders rallied around GameStop in early 2021, sending its stock price soaring from under $20 to as high as $483 in a matter of weeks in one of the highest-profile short squeezes of all time.
GameStop supporters had high hopes that Chewy Inc. (CHWY) co-founder Ryan Cohen could turn around the video game retailer’s struggling business when he took a minority ownership stake in the company and then joined GameStop’s board of directors in January 2021.
So far, the turnaround effort hasn’t produced the results investors had hoped for. GameStop’s revenue peaked back in 2012 and was steadily drifting lower even before 2020 shutdowns hit. In the most recent quarter, GameStop reported another $157.9 million net loss, its eighth quarter of losses out of the last nine. The company still has an unclear long-term turnaround plan, but it did recently announce a wave of layoffs and a four-to-one stock split to try to recapture some of that 2021 magic. GameStop shares are trading at around $150 and are down roughly 4.6% year to date through July 15, but Reddit traders don’t seem to care. They still like the stock.
Apple Inc. (AAPL)
Reddit traders have a reputation for high-risk, high-volatility stocks, but WallStreetBets is about more than just memes and YOLO trades. Apple has been one of the best and most consistent blue-chip tech stocks of the past decade. In the near-term, Apple will continue to face uncertainties surrounding supply chain disruptions and geopolitical tensions in Asia. However, Apple reported 5.5% iPhone revenue growth, 17.2% services growth, 12.3% other products growth and a whopping $25 billion in net income in the most recent quarter, once again demonstrating its world-class business model.
You likely won’t see GameStop in the Berkshire Hathaway Inc. (BRK.A, BRK.B) portfolio any time soon, but Apple is by far the largest stock holding of legendary value investor Warren Buffett’s holding company. Buffett is likely a big fan of Apple’s profitability, its massive cash hoard and its transition to a more recurring and highly visible services revenue model. Many investors are concerned rising interest rates will trigger a U.S. recession, but Apple’s pristine balance sheet and highly profitable business make it a great defensive bet in an uncertain economic environment.
Apple may not be the high-flying story stock it once was, but it certainly has Reddit traders buzzing.
Amazon.com Inc. (AMZN)
Shares of online retail and cloud services giant Amazon have slumped in 2022, putting investors in unfamiliar territory. In the first quarter, Amazon reported just 7% revenue growth, its slowest growth rate in more than two decades. To make matters worse, Amazon guided for between 3% and 7% revenue growth in the second quarter, a concerning trend for investors. Amazon also reported a $7.6 billion loss on its ownership stake in electric vehicle company Rivian Automotive Inc. (RIVN).
Like Apple, Amazon may no longer knock investors’ socks off with quarter-after-quarter of 40% revenue growth. But Amazon has been investing heavily in logistics and other services that position it well to accelerate its revenue growth once again in 2023 and beyond.
Amazon also recently secured a major new partnership with food delivery giant Grubhub to provide Amazon Prime members with one year of free Grubhub+, including $0 delivery fees. Amazon’s massive community of Prime members are also helping grow its advertising business, which reported impressive 23% revenue growth last quarter. Amazon’s AWS cloud services business is also still firing on all cylinders, growing revenue by 36.5% last quarter. Reddit traders still clearly see a lot to like about Amazon.
Advanced Micro Devices Inc. (AMD)
Chipmaker Advanced Micro Devices is exposed to some of the largest and fastest-growing tech fields, including PC gaming, data centers and autonomous vehicles. The company’s booming sales growth has generated an incredible 1,440% return for investors over the past 10 years. Despite supply chain disruptions, AMD recently reported impressive 70.8% revenue growth in the first quarter.
Reddit investors seem to believe AMD will continue to gain market share from Intel Corp. (INTC) for the foreseeable future. AMD is expected to roll out its 5-nanometer, fourth-generation EPYC server processors in the fourth quarter of 2022. Meanwhile, Intel recently delayed the launch of its next-gen Sapphire Rapids processors for the second time. Even when the Sapphire Rapids chips launch, Intel will remain stuck on a 7-nanometer process node.
AMD shares have pulled back significantly so far in 2022, but the sell-off has made the stock more attractive from a value perspective. AMD shares now trade at 6.8 times sales and 16.5 times forward earnings, an extremely attractive valuation for a stock with a massive addressable market and such impressive growth numbers. AMD’s recent acquisition of Xilinx will also help boost sales numbers in coming quarters.
ContextLogic Inc. (WISH)
E-commerce company ContextLogic has been a huge flop since its December 2020 initial public offering, but Reddit traders see it as a potential buying opportunity. ContextLogic went public at an IPO price of $24. Roughly a year and a half later, the stock is incredibly now trading around $1.60 per share.
ContextLogic has understandably been a popular target for short sellers, and the trade has been a home run for them up to this point. Nearly 11% of WISH’s float, or free-trading shares, is currently held in short positions, according to Ortex Analytics.
It’s easy to see why ContextLogic has struggled up to this point. E-commerce has been one of the largest long-term growth trends in retail and technology for years, but you wouldn’t know it by looking at ContextLogic’s finances.
In the most recent quarter, ContextLogic reported an abysmal 76% drop in revenue and a $60 million net loss, discouraging trends compared to e-commerce peers. Monthly active users dropped to just 23 million in the quarter, down from 101 million a year ago. Despite the lackluster quarter and outflow of users, Reddit traders must see the potential for a major ContextLogic turnaround given all the recent buzz surrounding the stock.
Twitter Inc. (TWTR)
Twitter is one of the largest social media platforms and has been another popular online environment outside of Reddit for stock traders to share their ideas about the market. Twitter’s stock has been one of the most trendy tickers on Reddit in recent weeks, thanks in large part to the drama surrounding the rescinded Elon Musk buyout offer.
On July 8, Twitter chairman Bret Taylor said the company plans to file suit against Musk to enforce the buyout deal at the agreed-upon $44 billion price tag. Musk has said Twitter breached its contractual duties by not accurately disclosing its number of fake bot accounts.
Twitter shares closed at $37.74 on July 15, 30% below Musk’s proposed $54.20 buyout price. The best-case scenario for Twitter investors is seemingly that the court enforces the deal. If not, Twitter could still agree to a sizable settlement, negotiate a lower buyout price or at least secure a $1 billion breakup fee from Musk, all of which would theoretically be good for the company.
As popular as Twitter is as a platform, it has struggled as a public company. Twitter shares are up only about 45% overall in the nearly nine years since its 2013 IPO.
AMC Entertainment Holding Inc. (AMC)
Other than GameStop, AMC has been the poster child of the Reddit-driven meme stock trading frenzy. Social distancing completely shut down AMC’s movie theater business in 2020, leaving the company at risk of financial insolvency in early 2021. However, WallStreetBets got the hashtag #saveAMC trending on social media, and AMC took advantage of its soaring share price to raise hundreds of millions of dollars of desperately needed capital.
AMC’s long-term debt load has ballooned to $5.5 billion, but the company recently reached a major milestone on the weekend of June 9-12, 2022. That weekend is the first weekend since the pandemic began that AMC had exceeded its pre-pandemic revenue compared to the same weekend in 2019.
Unfortunately, AMC still must prove it can convert those sales into profits and address its massive debt load. In the most recent quarter, AMC reported another $337.4 million net loss.
AMC recently announced a somewhat puzzling investment in penny stock gold and silver miner Hycroft Mining Holding Corp. (HYMC). WallStreetBets isn’t questioning why a movie theater would invest in a mining company. The AMC “ape army” remains bullish.
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