Needless to say, nothing replaces man’s best friend, except in one situation. Figuratively speaking, stock traders on Reddit’s r/WallStreetBets are looking for high-payoff ideas. Gone are the days of holding Apple (NASDAQ:AAPL) for the long term for forum members. Instead, traders on Reddit are looking for stocks that get a lift from strong but short-lived, buying momentum. It takes only slightly more than a month of steady buying to squeeze short-sellers. GameStop (NYSE:GME) is the best-known example of this phenomenon. Hedge funds bet against the retailer’s prospects, despite retail investors accumulating the stock.
By early February 2021, GME stock soared to as high as $483. It tried, in the months that followed, to sustain a $250 stock price. This failed because the sub-forum is looking for the next high-flying stock.
But these seven Reddit stocks are looking to replace Fido as man’s best friend. Listed in alphabetical order, they are
- Coupang (NYSE:CPNG)
- Palantir Technologies (NYSE:PLTR)
- Clean Energy Fuels (NASDAQ:CLNE)
- Cleveland-Cliffs (NYSE:CLF)
- CrowdStrike Holdings (NASDAQ:CRWD)
- Pinterest (NYSE:PINS)
- SoFi Technologies (NASDAQ:SOFI)
Overall stock scores range from good to fair
In the above chart, sorted by overall score, Pinterest has the best ranking. SoFi is a post-SPAC (special purpose acquisition company) and is too newly listed to get a score. At the bottom of the list is Coupang. It will need to post another quarter of growing revenue to earn a higher StockRover score.
The WSB group mentioned the above stocks at least a handful of times. Palantir and Cleveland-Cliffs are longtime favorites. Both companies are American-based firms battling global competitors for dominance.
Reddit Stocks: Coupang (CPNG)
On June 18, Coupang apologized for a fire at one of its biggest distribution centers in South Korea. For some unusual reason, CPNG stock rallied on the day. Investors may have reacted to a story about Coupang mulling over the redemption option of a loan.
Paying back $265 million in loans would improve the online retailer’s financial profile. Shaving down the loan would save the company around 5.5% in interest payments. Coupang needs to apply all cash-flow growth to investing back into the business. It also is expanding in Japan.
More recently, the firm began operations in Singapore. The more locations it opens, the harder it gets for American firms to start building any market share in the Asian region. Profit margins will fluctuate in the near term as Coupang invests in the fulfillment logistics infrastructure, works on scale and efficiency, and seeks higher growth rates.
The company may achieve growth rates in the range of 50-60% for the next few years. The product mix is improving to lift customer growth rates.
Palantir Technologies (PLTR)
Artificial intelligence (AI) and machine learning are the buzz words that will catch Reddit’s attention. Palantir does more than that. After customers get past the high learning curve, they are willing to increase their spending on Palantir’s products.
In the first quarter, Palantir posted strong free cash flow in the quarter. Customer spending in the government sector creates a long tailwind for revenue growth. The company has yet to win more clients on the Fortune 500 list. Its big addressable market suggests that the stock could soon reach new highs in the coming quarters.
Traders thought that Palantir stock bottomed in the $25 range only to watch it plunge below $20 in early May. The stock’s rally lost steam at the end of last week. Still, speculators are looking for a return of a double or more in the coming years. Gotham and Apollo offer the military agencies cutting-edge AI solutions. The governments are signing five-year contracts at a time. Notably, contracts amounting to under $100 million are hardly newsworthy. Still, Palantir may announce many of them weekly, lifting the stock price.
Reddit Stocks: Clean Energy Fuels (CLNE)
The clean energy sector peaked in February 2021 only to bottom out by May. Last month, the froth resurfaced, with Clean Energy, an oil- and gas-refining and marketing firm, leading the way.
Clean Energy has over 560 stations throughout North America. It is the leading Renewable Natural Gas (RNG) player in the U.S. RNG volumes are growing. As countries impose strict carbon emission levels and seek zero emissions, CLNE stock gets the biggest lift. For example, RNG manure and food waste have a carbon emission of -79.9 and -532.7 gCO2e per MJ, respectively. Gas and diesel has a 100.6 gCO2e per MJ.
The company has a big addressable market. Transit vehicles, fleet services, refuse vehicles and heavy-duty trucks may use clean-energy fuels over the next few decades.
CLNE and clean energy stocks in general are highly speculative. Last month, the stock tumbled when its largest shareholder sold 1.25 million shares. The company reported a 7% drop in revenue in Q4 of 2020. It lost a penny a share, compared to 20-cent GAAP EPS (earnings per share) the year before.
Cleveland-Cliffs (CLF)
Among all the Reddit stock favorites, Cleveland-Cliffs has very strong prospects. The short interest is 10.5%.
For the second quarter, CLF forecasted an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.3 billion. Its full-year 2021 adjusted EBITDA will top $5 billion. The company’s assumption depends on the US HRC index price averaging $1,175 per net ton for the rest of the year. The strong outlook suggests that CLF stock price could double by the end of the year. And if management beats its revised figures, the stock will rally by even more.
For the full year, Cliffs will benefit from strong global growth. The economy is overheating and the Federal Reserve is doing nothing to slow inflation. The hot demand for iron ore will probably lift prices further, raising Cliffs’ profits.
On Wall Street, six of nine analysts rate the stock as a buy, according to TipRanks. The average price target is $28.32. Conversely, based on its future cash flow discounted to present value, CLF stock could trade at below $20. Its fair value depends on metal prices matching management’s forecast.
Reddit Stocks: CrowdStrike Holdings (CRWD)
The cybersecurity threat is growing and CrowdStrike is the software company that will protect customers. SentinelOne’s initial public offering (IPO) on June 30 only highlighted the growth proposition in CRWD stock.
CRWD offers cloud-based protection to customers. It has 11,420 subscription customers, with 64% of them having 4+ modules. Organizations still running on-premise solutions suffer from delayed protection and inflexibility. CrowdStrike’s solution is powered by cloud-scale AI. Therefore, the company assesses the threat through cloud modules and prevents breaches.
CRWD has a history of beating its guidance. For example, it outperformed expectations for the last few quarters. Its annual recurring revenue (ARR) growth is healthy. Strong, secular growth would support the stock’s valuations. Chief Financial Officer Burt Podbere pointed to the crypto market as a catalyst for further growth. He said, “I think, fueled a little bit or enabled really by digital currency crypto. I mean, that’s been a big reason for some of the attacks that you’re seeing in the proliferation of these attacks moving to the cloud and then obviously the digital transformation and security transformation.”
Since Bitcoin (CCC:BTC-USD) prices continue to rise over the long term, demand for CrowdStrike solutions will increase, too.
Pinterest (PINS)
Pinterest’s unique social networking platform justifies the stock’s rally to 52-week highs. PINS stock briefly fell when user growth lagged in the first quarter. Still, its live stream tests will increase user engagement.
Between May 24 and May 26, Pinterest tested live events. The company is embracing the rise of the creator economy. Such initiatives will sustain Pinterest’s growth rates. In Q1, the company posted a 30% increase in monthly active users to 478 million. In Q2, revenue will double last year’s levels. Global monthly active users (MAU) will grow in the mid-teen percentage rates. In the U.S., MAUs will be near flat year-over-year.
Pinterest has plenty of growth potential ahead. It has a largely untapped international market to explore. Advertisers who want a better rate and who want to avoid the other big platforms will give Pinterest a try. Most importantly, advertisers may want a platform that has no political noise. Political controversy may lift traffic on other sites but may hurt a brand’s advertising initiatives.
The average analyst price target on PINS stock is around $86.
Reddit Stocks: SoFi Technologies (SOFI)
SoFi rallied to as high as $23 in the last few weeks before profit-taking sent the stock to around $16 today. Redditors like Chamath Palihapitiya’s post-SPAC company. SoFi is the favorite because this fintech has cost advantages over the big banks. CEO Anthony Noto has a strong understanding of the traditional banking system. Plus, he has a vision of the future in banking.
SoFi has a leading-edge consumer-facing platform. It is positioned to cross-sell investing and lending products to customers. After it closed its merger transaction with Chamath’s Social Capital, it raised around $2.4 billion in cash proceeds. This will enable the company to expand globally.
It may start building a one-stop-shop for its members to invest, save and spend.
Typical of most de-SPAC firms, SoFi fell sharply on June 4. Volatility increased after that. When the dust settles and the stock stops falling, Redditors may patiently accumulate SOFI stock whenever it dips.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.
