Some people seem to believe that meme stocks cannot have good fundamentals and that names with strong fundamentals cannot be meme stocks.
But I think that’s a misconception. In my mind, a meme stock is an equity that has rallied primarily because it’s been bought by retail investors in general and individuals who love talking about stocks on social media in particular.
Most meme stocks are overvalued and many have lousy fundamentals. For example, GameStop (NYSE:GME) is overvalued, while Koss (NASDAQ:KOSS), Ocugen (NASDAQ:OCGN), AMC (NYSE:AMC), Virgin Galactic (NYSE:SPCE), and Palantir (NYSE:PLTR) are all drastically overvalued and have poor fundamentals.
But it’s not impossible for a meme stock to have strong fundamentals and, in the big picture, actually be undervalued. Some stocks can fit both criteria. Let’s take a look at four meme stocks with strong fundamentals.
Promising Meme Stocks: Bionano (BNGO)
The company’s blockbuster product, a DNA analysis tool called Saphyr, is able to pinpoint and track the makings of certain genetic diseases in patients. It’s technology can identify and diagnose diseases better than other competing systems. Moreover, Saphyr is much cheaper than standard DNA analysis products.
Studies of Bionano’s Saphyr consistently confirm its accuracy and ability to detect important structural variations of DNA that cause diseases.
For example, in a recent note to investors, Maxim analyst Jason McCarthy noted in studies of patients with inherited genetic diseases and blood cancers, Saphyr was shown to be “superior” to competing DNA analysis tools.
Many huge labs and universities, including Paris Cochin Hospital, two large laboratories of the UK’s National Health System, and the “Largest Hospital Diagnostic Lab in Canada” are utilizing Saphyr, further validating the claim.
Since demand for Saphyr is likely to become huge, the valuation of BNGO stock, which has a market capitalization of less than $2 billion, is highly appealing.
The UK-based electronic vehicle manufacturer, Arrival, is a relatively new company specializing in EVs for the commercial sector.
Despite its age, two of the world’s largest and most prominent shipping and transportation companies have tapped Arrival for huge projects.
Meanwhile, Uber (NYSE:UBER) has teamed up with Arrival to develop ride-hailing EVs, and the companies said they were considering launching an alliance in “strategic markets, including the UK and EU. ”
Arrival says that, using its “microfactory” approach, it will be able to produce EVs that cost buyers roughly the same as equivalent vehicles propelled by gasoline.
Since the company looks very well-positioned to be one of the world’s leading EV makers, the $8.8 billion market capitalization of ARVL stock makes it quite a bargain for long-term investors.
Promising Meme Stocks: BlackBerry (BB)
BlackBerry remains a battleground stock, even though the company has generally become cash-flow positive and is widely viewed as one of the world’s top IT security companies.
With the demand for IT security jumping, BlackBerry integrating advanced artificial intelligence into its cybersecurity offerings and beefing up its sales force, the company’s IT security revenue should surge by the end of 2021.
Meanwhile, BlackBerry is developing, in tandem with Amazon (NASDAQ:AMZN), an auto app store. Since BlackBerry’s QNX operating system is already present in an estimated 195 million vehicles and Amazon has huge amounts of prestige, money and impressive technology, the alliance should be extremely potent. And with tech analysts predicting that auto apps will be very lucrative over the longer term, BlackBerry is poised to get a huge lift from the app store.
As I wrote in a June 28 column, ContextLogic gives investors tremendous revenue growth, and the company’s sales should continue to soar as it expands to new markets.
Importantly, the company’s gross profit has also been jumping, and “the number of merchants on its websites more than quadrupled last quarter from the previous year. In the U.S., its merchant count nearly tripled,” as I noted in my previous column.
Other strong assets for ContextLogic include its extremely impressive list of investors, its rapidly expanding logistics unit, and the low prices of its products.
Amid vastly overdone fears about Chinese regulation of tech companies and the general downturn of tech stocks, WISH stock has tumbled by about 65% since February, giving investors the chance to buy the shares at a very reasonable price. In the wake of the downturn, the shares are now trading at a very reasonable price-sales ratio of 2.4.
On the date of publication, Larry Ramer held long positions in ARVL, BB, and BNGO and a short position in OCGN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, Ford, Exxon, and Snap. You can reach him on StockTwits at @larryramer.