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 an online army of social media supporters says it isn’t going away until the share prices of these stocks make it to the moon.
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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)
— Netflix Inc. (NFLX)
— Apple Inc. (AAPL)
— GameStop Corp. (GME)
— Meta Platforms Inc. (META)
— Amazon.com Inc. (AMZN)
— Advanced Micro Devices Inc. (AMD)
— Snap Inc. (SNAP)
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 Inc. (TWTR ) priced at $54.20 per share back in April. He then sold about $6.9 billion of his Tesla stock as part of his effort to fund the Twitter acquisition before attempting to back out of the deal, prompting Twitter to sue him to enforce it.
The Twitter deal appears likely to close by Oct. 28, but Tesla shareholders are likely annoyed with the distraction, as a combination of Musk’s selling, auto market supply chain disruptions and a broad market rotation out of growth stocks has Tesla trading down more than 40% this year. Tesla also recently missed consensus analyst estimates with its third-quarter auto deliveries and revenue.
Even after the 2022 sell-off, Tesla’s stock still trades at 38.7 times forward earnings estimates and 9 times sales, making it steeply valued compared with other auto and large-cap tech stocks.
Netflix Inc. (NFLX)
Shares of popular video streaming platform Netflix took a huge hit in early 2022 after the company reported two consecutive quarters of negative subscriber growth. Netflix was once the unquestioned leader in streaming video content, but it has faced a tidal wave of new competition in recent years, led by Disney+ from Walt Disney Co. (DIS) and Prime Video from Amazon.
Fortunately, Netflix broke its pattern of subscriber losses in the third quarter, surprising Wall Street by adding 2.4 million net subscribers. That growth far exceeded its own guidance and analyst expectations of just 1 million subscriber additions.
Netflix is also breaking away from its traditional business model and is debuting an ad-supported subscription tier priced at $6.99 per month in select markets starting in November. A more affordable subscription tier could certainly boost subscriber numbers, but it’s unclear at this point whether or not the ad-supported tier will cannibalize subscribers from Netflix’s higher-priced tiers. Netflix also plans to crack down on password sharing starting in 2023.
Reddit traders appear to be optimistic about Netflix’s new $6.99 tier, which will be $1 per month cheaper than similar ad-supported subscriptions offered by Hulu and Disney+.
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. You likely won’t see GameStop in the Berkshire Hathaway (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.
Apple reported 3% iPhone revenue growth and 12% services growth in the most recent quarter, but “other products” revenue dropped 8%. Many investors are concerned that 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 shares are down 15.9% this year as of Oct. 26, but it is still the best-performing stock on this list and has fared slightly better than the S&P 500 as a whole.
Apple may not be the high-flying stock it once was, but it certainly has Reddit traders buzzing.
GameStop Corp. (GME)
More than any other stock, GameStop embodies the 2021 WallStreetBets meme stock ethos. Reddit traders rallied around GameStop in early 2021, sending its stock price soaring from less than $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 anticipated. 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 $108.7 million net loss, its ninth quarter of losses out of the last 10. The company still has an unclear long-term turnaround plan, but it recently launched a non-fungible token, or NFT, marketplace and announced a new partnership with cryptocurrency exchange FTX. GameStop shares are down 31.5% this year as of Oct. 26, but Reddit traders don’t seem to care. They still like the stock.
Meta Platforms Inc. (META)
Facebook and Instagram parent company Meta Platforms has faced one headwind after another in 2022. Meta changed its name from Facebook in November 2022 as part of a strategic shift in focus to building the metaverse, an integrated virtual online environment in which people live, work and play. In February 2022, Meta shares plummeted 26% after the company said Apple’s privacy policy changes will decrease Meta’s revenue by about $10 billion in 2022. Meta’s market capitalization dropped by $230 billion that day, the largest single-day drop in value for one stock in the history of the U.S. stock market.
Meta also reported its metaverse business lost $10 billion in 2021 and said its Facebook app lost about 1 million daily active users, its first year-over-year drop in users in the company’s history. Things went from bad to worse in July, when Meta reported its first negative revenue growth since the company went public back in 2012.
Meta shares are now down about 70% this year, and it may still be years before investors will know whether or not the company’s metaverse investments will pay off. Reddit traders seem confident the company can find a way to stop the bleeding at some point.
Amazon.com Inc. (AMZN)
Shares of online retail and cloud services giant Amazon have slumped in 2022, putting investors in unfamiliar territory. Amazon reported just 7% revenue growth in the first two quarters of 2022, its slowest growth rate in more than two decades. In addition, the company reported an $11.5 billion loss on its ownership stake in electric vehicle company Rivian Automotive Inc. (RIVN) in the first half of 2022. Amazon also laid off nearly 100,000 employees during the second quarter as it deals with rising labor costs in an inflationary environment.
Fortunately, Amazon has guided for third-quarter revenue growth of between 13% and 17%, suggesting the company may be gaining momentum heading into the end of the year. 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.
Finally, Amazon’s massive community of Prime members are helping to grow its advertising business, which reported impressive 18% revenue growth in the second quarter. Amazon’s AWS cloud services business is also still firing on all cylinders, growing revenue by 33% in the 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. Despite supply chain disruptions, AMD reported impressive 70.1% revenue growth in the second quarter.
Unfortunately, the geopolitical landscape hasn’t been particularly kind to AMD in recent months. Analysts say AMD competitor Intel Corp. (INTC) may disproportionately benefit from the CHIPS and Science Act, which allocates more than $52 billion to domestic U.S. semiconductor production. AMD shares also took a hit in October, after the U.S. unveiled a new set of rules restricting the sale of advanced computing semiconductors to China to protect national security and foreign policy interests.
AMD is expected to roll out its fourth-generation EPYC server processors in the fourth quarter of 2022, and Reddit investors seem to believe AMD will continue to gain market share from Intel for the foreseeable future.
AMD shares have pulled back significantly so far in 2022, but the sell-off has made the stock more appealing from a value perspective. Shares now trade at 4.4 times sales and 15.3 times forward earnings, an extremely attractive valuation for a stock with a massive addressable market and such impressive growth numbers.
Snap Inc. (SNAP)
As bad as things have been for Meta in 2022, they have somehow been even worse for competing social media company and Snapchat parent Snap.
In February 2021, Snap guided for 50% revenue growth over the next several years. Unfortunately, Snap’s revenue growth slowed to just 6% in the third quarter of 2022. While Snap grew its daily active users by 19% in the quarter, its average revenue per user was down 11% from a year ago.
Snap’s advertising business also took a big hit from Apple’s privacy changes, but its biggest problem may be TikTok. For years, Snapchat was known for its appeal to the youngest generation of social media users, but TikTok has now taken over as the most-popular social media app among teenage users, according to Piper Sandler.
While Facebook’s growth has slowed significantly, Meta still reported a $6.7 billion profit last quarter. In the third quarter, Snap reported a $360 million net loss.
Given the company’s struggles, it’s understandable why the stock is down as 79.6% of Oct. 26, making it the worst performer on this list. Reddit traders haven’t lost faith in Snap and are betting on a turnaround at some point.
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8 Reddit Stocks Trending Now originally appeared on usnews.com
Update 10/27/22: This story was previously published at an earlier date and has been updated with new information.
