Reddit has become an unlikely stock trading hub in 2021. With more people turning to the site for financial advice, it’s no surprise that Redditors are making fortunes off their stock picks. Online traders have become more innovative and aggressive with their trading tactics. They can orchestrate targeted buying campaigns in some of the most shorted stocks, leading them into massive squeezes for meme stocks, creating an opportunity for those who know what they’re doing — like seasoned trading professionals.
The practice picked up steam during Covid-19, but there are no signs of things changing anytime soon. Their impact is only getting better. It is such a burning issue that even Congress sits up and takes notice. They even held an informal hearing earlier this year to better understand the phenomenon and how it can help traders make more informed decisions when trading stocks, futures contracts, or other financial products online.
However, the fundamentals of investing remain the same. You have to assess the financials of the business and its outlook. The stock market continues to be unpredictable, and meme stocks are top performers this year.
But with the volatility comes the risk of losing all your money quickly if you invest in the wrong one. Keep this in mind when you are analyzing the following meme stocks:
- Nvidia (NASDAQ:NVDA)
- Tesla (NASDAQ:TSLA)
- Advanced Micro Devices (NASDAQ:AMD)
- GameStop (NYSE:GME)
- Cloudflare (NYSE:NET)
- Walt Disney (NYSE:DIS)
- Big 5 Sporting Goods (NASDAQ:BGFV)
Meme Stocks: Nvidia (NVDA)
Nvidia is one of the best-performing stocks of all time. In the last five years, shares of the chipmaker have increased by 1,291%. That kind of astronomical growth puts it in the same league as the more famous FAANG stocks. However, the company continues to chip away without getting even a quarter of the press. There is nothing that explains it, though. Revenues are increasing consistently, and the outlook is healthy. And it has several near-term catalysts, like the Metaverse, that should hold it in good stead moving forward.
Let’s discuss the Metaverse first since it has been generating the most interest recently. Since Facebook changed its name to Meta (NASDAQ:FB) to mirror its increasing focus towards the Metaverse, the investing world is on its toes. It’s no surprise that the Metaverse is a hotbed for all sorts of technological discovery. It can be applied to any invention or technology which would create an artificial world, but with added elements like graphics and sounds — essentially making it more immersive than ever.
Regardless of where you are on the topic, one thing is sure. You need an excessive amount of computing power to run the Metaverse. Nvidia’s Omniverse platform helps them do so, and this open-source software has become an integral part of the Metaverse.
Nvidia, alongside AMD, is also a prolific semiconductor company. Semiconductors are an integral part of our everyday life, which we are acutely aware of after the recent chip supply shortage. They play a central role in the operation of bank ATMs, trains, and other parts that we use daily to communicate with friends or conduct business transactions online.
The Tesla craze has been on for an entire year, and October was the month where everyone wanted in. This electric car-maker has always had its fair share of controversy with their CEO Elon Musk at its center — but this time around, things are different; investors see him more as a visionary than ever before.
Since the beginning of October, Tesla shares have been up 58%. You can attribute this great performance to rental car giant Hertz Global Holdings (NASDAQ:HTZ), buying 100,000 Tesla Model 3s for its international fleet. The announcement sent them soaring to new all-time highs above $1,200 and caught many people’s attention in a positive light.
However, TSLA is still grossly overvalued by most counts. Investors have poured into this one with reckless abandon due to Elon Musk’s personality and the wider adoption of EVs. Governments worldwide are serious about reducing carbon emissions to combat adverse effects on the climate and reduce reliance on oil and gas.
That is leading to a spending bonanza. President Joe Biden’s $7.5 billion EV charging plan is part of the bipartisan Infrastructure Investment and Jobs Act. Such legislations are now commonplace all over the world.
Meanwhile, Musk continues to have a major impact on markets. He is a disruptor in every sense of the word. In 2002, after intensive research and development into space transport technologies that would enable humanity to become multi-planetary — Musk founded SpaceX with one goal: to send humans beyond our solar system.
He is also one of the leading lights behind autonomous driving and sustainable batteries. Naturally, you cannot put a price tag on these ventures. Investors, though, think differently. They are pricing these future gains into TSLA stock already. That makes trading TSLA stock a tricky proposition. Its unique status among meme stocks is because of Elon Musk. So, you could probably see more rallies along the way.
Meme Stocks: Advanced Micro Devices (AMD)
Advanced Micro Devices is involved in various technology fields, including PC gaming data centers. The company has delivered an incredible 1,185% return for investors in the past five years. It is a spectacular number that few other companies can beat.
AMD’s recent impressive 53.9% revenue growth in the third-quarter comes when global semiconductor shortages leave many companies struggling to make their devices work properly or even produce them altogether. Reddit investors are invested in the growth of AMD’s x86, which has greatly eroded Intel’s (NASDAQ:INTC) market share. Although AMD is trading at a premium valuation, that does not seem to factor into the equation for Redditors at this stage.
For years, the war between Advanced Micro Devices and Intel has continued. It’s always in the news, with investors vying to see which company will come out ahead. It looked like the two companies were going head to head for a while. But now AMD has pulled ahead and with good reason. At the turn of the millennium, Intel could justifiably lay claim as perhaps the top semiconductor company in the world. But due to a lack of innovation, things have changed rapidly. Intel had been stuck on 14 nanometers for a long time delaying its move to 10nm by several years.
Although it introduced the world’s first consumer microprocessor, the lack of innovation hurts the company badly. Trying to arrest the situation, Intel is investing heavily in manufacturing. However, Redditors have a clear feeling that AMD is the better option. And as AMD continues to take more market share from Intel, few can argue with them.
GameStop has been symbolic of WallStreetBets and their legendary short squeeze efforts. But the company’s underlying business is still struggling. GameStop’s revenue has been steadily decreasing over the last few years. The company is still trying to get back on its feet after 2020, but it hasn’t gone well for them so far.
In the face of growing competition and changing consumer habits, GameStop recently delivered another disappointing earnings report, net loss increasing to $105.4 million from $18.8 million last year. Total revenue jumped $1.30 billion from $1 billion in the year-ago period. On the bright side, GameStop has stocked up well for the upcoming holiday season. Its inventory stood at $1.14 billion versus $861 million in the comparable quarter last year.
As it tries to transform from a brick-and-mortar retailer, Game Stop looks for fresh leadership to lead the charge. The company has tapped Chewy (NYSE:CHWY) co-founder Ryan Cohen as Chairman, hoping he can arrest the video game retailer’s decline. Former Amazon (NASDAQ:AMZN) executives Matthew Furlong and Mike Recupero, as CEO and COO, respectively, will help him in this endeavor.
Nevertheless, seasoned investors are still waiting for GME to deliver the goods. It has the capital it needs to change its fortunes. Now it’s up to the management. Redditors are holding their ground, though. The stock price has not fallen precipitously as most analysts predicted. So, you have a solid floor price if you want to trade this one alongside other meme stocks.
Meme Stocks: Cloudflare (NET)
Cloudflare provides a host of services to secure websites, including one that protects your data from cyber-attacks and other malicious traffic. Over the last year, the stock has had a great time, gaining more than 62.1%, and Reddit traders have also profited handsomely. It’s no surprise that they’re happy with their investment, given how much it went up recently.
Cloudflare has been delivering outstanding numbers since its founding, with a 51% revenue growth in the last quarter alone. The company also reported its first-ever quarter in which it was profitable on a non-GAAP basis. Its success is clear to see, with customers surpassing 132,000 in the quarter and enterprise clientele reaching 1,260, up 71%. Enterprise customers are those spending over $100,000 each year. The company’s revenue retention rate was 124%. All those metrics look great.
Overall, Cloudflare is a great company. But its stock’s valuation isn’t one of the reasons. Shares are up substantially over the last year. It is dabbling in several areas that will become a part of our everyday lives moving forward. It also has a lot of cash on its balance sheet. The only fear is whether the company can compete with the likes of Amazon, Microsoft (NASDAQ:MSFT) and whether it is best to wait for a better price point before buying in.
Walt Disney (DIS)
Disney was one of this year’s most talked-about tickers for those who may not have been following meme stocks. However, the entertainment giant recently faced a lot of trouble with its earnings report, which was anything but thrilling. T
he company fell short on analyst expectations, and subscriber growth slowed down to crawl–it’s clear that this isn’t good news for shareholders either. Disney Plus now has 118.1 million subscribers. The figure is up 60% year on year, but the figure grew just 2.1 million new members sequentially. You can blame the sluggish numbers on India. The market lost approximately 2 million subscribers due to Indian consumers losing interest in Disney Plus Hotstar.
The company prioritized streaming over all other entertainment efforts a year ago. So, the sluggish growth is something alarming for sure. That’s why DIS stock fell over 11% after the entertainment giant posted these numbers.
Disney’s original plan is to reach the milestone of having at least 230 million to 260 million paying members by 2024, but that might not happen. They also announced their intention less than one year ago for ten new Star Wars and Marvel-branded series on Disney+. As these programs make their way onto the product, they should also attract more attention from viewers.
In addition, if the omicron variant remains under control, Walt Disney will mint money from their amusement parks next year. There is a lot of pent-up demand for amusement parks and cruise lines. It is just the kind of cushion Disney needs as it tries to make a solid platform for its streaming business.
Meme Stocks: Big 5 Sporting Goods (BGFV)
The pandemic gave Big 5 a major boost in sales last year, with consumers flocking to outdoor activities as they looked for things that would be fun and productive. But the retailer’s recent revenue has not been keeping up with last year. Third-quarter sales fell 5% compared to the previous quarter, and analysts have predicted that it will continue this trend for at least another three quarters before returning towards normalization in 2020
Over the years, BGFV has been a solid performer. So, investors will not mind the company taking its time and finding its bearings. It has earned that right. Plus, it has no debt on its books, which the markets love. And income investors will find its dividend yield of 4.86% extremely juicy compared to the industry.
Hence, recent poor performance is probably not an issue for investing in stocks and futures. For investors in Big 5 shares, we’ve seen three outsized surges since May with little else happening other than short squeezes each time–perhaps traders can continue working toward a more prolonged rally. If not, you have a legacy sporting goods retailer trading at a very attractive discount.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.