With social media-driven investments dominating headlines, it was no surprise that Reddit’s most popular meme stocks garnered tremendous interest in 2021. Unfortunately, circumstances have not panned out well. Primarily, the Federal Reserve may be to “blame,” if you will. Due to wild fluctuations in the M2 money stock, investor sentiment understandably slipped.
Now, before we begin this discussion of Reddit’s most popular meme stocks, it’s confession time. I’m not entirely sure whether these ideas represent the absolute most fashionable market plays. Instead, I elected names that various publications focused on while incorporating some diverse industries. That way, we’re not just talking about one specific sector.
Further, I used Gurufocus.com to provide an objective ranking of the selected Reddit’s most popular meme stocks by financial stability. While you or I might not agree with the ranking itself, I simply stuck with what was presented. That way, we have an objective baseline to work with.
Without further ado, here are Reddit’s most popular meme stocks ranked from best to worst.
|BBBY||Bed Bath & Beyond||$4.30|
Meta Platforms (META)
A social media giant turned into a metaverse specialist, Meta Platforms (NASDAQ:META) undoubtedly saw itself in a different position than where it is right now. Bluntly speaking, the next generation of digital connectivity doesn’t look inspiring for Meta. Further, the company’s increased capital expenditures on its metaverse initiatives raise alarm among several analysts. At the time of writing, META hemorrhaged nearly 72% of equity value on a year-to-date basis.
Despite the metaverse miscues, fundamental investors should see tremendous value in the otherwise sterling organization. For instance, the company’s three-year revenue growth rate stands at 29.2%, better than 79% of its peers. On the bottom line, Meta’s net margin is 24.4%, ranked better than 85% of the competition. As well, it features a return on equity (ROE) of nearly 23%, reflecting a very high-quality business.
Plus, you can make the case that META represents a significantly undervalued business. For example, its forward price-earnings ratio is 11.8 times, lower than the industry’s median of 15.7 times. Sure, as a name among Reddit’s most popular meme stocks, META presents risks. However, it’s arguably the smart way to speculate.
One of the most powerful companies in the world, Apple (NASDAQ:AAPL) utterly dominates the consumer electronics space. Still, even this dominance hasn’t been enough to spare AAPL from volatility. Since the beginning of this year, shares fell over 17%. Nevertheless, it’s a far better performance than what the underlying Nasdaq Composite index put up. It’s down over 31% during the same period.
A major reason why Apple outperformed its tech peers centers on its brand power. Even with economic woes, consumers can’t get enough of Apple’s latest gadgets and gizmos. Naturally, this brand power shows up on the financials. For instance, Apple’s three-year revenue growth rate stands at 20%, much higher than the hardware industry’s median rate of 2.85%.
Additionally, the tech giant lights up the profitability angle. For example, its net margin stands at a whopping 25.3%. That’s ranked higher than almost 96% of the industry. Furthermore, the company’s ROE is over 160%, reflecting an extremely high business quality. As one of Reddit’s most popular meme stocks, you really can’t go wrong with AAPL.
During the immediate aftermath of the coronavirus pandemic, Netflix (NASDAQ:NFLX) eventually made its way toward record highs. Essentially, the streaming service provider benefitted handsomely from a captive audience. But toward the latter half of 2021 and well into 2022, the revenge travel phenomenon took over. Suddenly, people wanted real experiences over digital ones, leaving NFLX reeling. Shares fell 52% YTD.
Despite the turmoil, NFLX ranks among Reddit’s most popular meme stocks. Fundamentally, investors took great encouragement at Netflix beating expectations for the third quarter of 2022. What could be intriguing here is that the entertainment space may be on a pivot to the living room. Part of this dynamic may stem from consumers seeking cheaper means of entertainment. If so, NFLX may once again represent a handsome beneficiary.
Financially, Netflix still delivers the goodies for prospective stakeholders. Both of its core revenue and profitability metrics stand well above industry norms. Plus, the company has a stable balance sheet, characterized by an Altman Z-Score of 4.53, indicating low bankruptcy risk.
With economic headwinds brewing (in part due to the fluctuations and vagaries of Fed policy) consumer sentiment carries vulnerabilities. You know circumstances are bad when the storms also negatively impact e-commerce giant Amazon (NASDAQ:AMZN). For once, Amazon understands what it’s like to get the wind knocked out of it. Since the beginning of the year, AMZN dropped over 43% of its equity value.
While a tough pill to swallow for many stakeholders, AMZN consistently ranks among Reddit’s most popular meme stocks. Fundamentally, it’s not a bad place to put your money to work (even though right now, it’s getting worked). For example, Amazon’s three-year revenue growth rate stands at 25.1%, above nearly 87% of its peers. Also, its book growth rate during the same period is 45.2%, higher than nearly 92% of the underlying sector.
Further, Amazon enjoys some stability in the balance sheet, though the circumstances this year haven’t helped. Nevertheless, Amazon’s Altman Z-Score is nearly 3.7, which is still on the safe zone regarding potential bankruptcy risk.
Occidental Petroleum (OXY)
With Occidental Petroleum (NYSE:OXY), we’re moving into the riskier realm of Reddit’s most popular meme stocks. To be clear, on paper, it doesn’t look that way. Since the January opener, OXY skyrocketed to the tune of almost 138%. Presently, Occidental enjoys a market capitalization of $67.6 billion. If anybody cleaned up during the wild events of 2022, it’s OXY.
Of course, many meme traders jumped aboard Occidental because of legendary investor Warren Buffett’s enthusiasm for the energy company. So, while OXY might be one of Reddit’s most popular meme stocks, it doesn’t necessarily mean you should buy it. Primarily, Gurufocus.com labels Occidental’s business as significantly overvalued.
At the moment, the company’s price-to-book ratio is 3.8 times, well above the oil and gas sector’s median of 1.35. As well, Occidental features a cash-to-debt ratio of 0.06 times, which is lower than 86% of its peers. In other words, while OXY isn’t a bad investment, better ideas exist.
Bed Bath & Beyond (BBBY)
Easily one of Reddit’s most popular meme stocks based on earlier hype this year, Bed Bath & Beyond (NASDAQ:BBBY) initially attracted contrarians based on its turnaround potential. Sadly, circumstances didn’t pan out that way, with key supporters dumping shares. Such actions demonstrated the capricious nature of meme trades, yet some folks decided to press on. Presently, BBBY incurred a loss of nearly 71% YTD.
According to Gurufocus.com, BBBY may represent a possible value trap. For instance, you’ll notice that its price-to-sales ratio is 0.06 times, favorably below almost 98% of the competition. But then, you look at the three-year revenue growth rate (on a per-share basis) and you’ll notice that it’s negative. What should really scare folks about this figure is that shares outstanding generally declined over the past several quarters. If anything, revenue per share should increase since fewer shares are available to the public. That it still trends negatively suggests deeply seated problems. Unless you have good reason to invest in BBBY, most market participants should step away.
SoFi Technologies (SOFI)
One of the popular financial technology (fintech) firms, SoFi Technologies (NASDAQ:SOFI) generated plenty of buzz as a leading name among Reddit’s most popular meme stocks. However, the company continues to suffer fundamental challenges. Therefore, Wall Street has taken a dim view of SOFI stock. Since the start of the year, shares dropped over 63% in equity value.
To be fair, SOFI did pop up on the Tuesday session by more than 5%. The underlying company beat expectations in the third quarter for revenue and pared down the expected earnings loss. One analyst mentioned that SoFi’s Q3 report was outstanding, leading to broader enthusiasm following the disclosure.
While I’ll give credit where it’s due, it’s also important to realize that one quarterly report usually doesn’t change the entire narrative. Fundamentally, a major concern centers on share dilution. For instance, at the end of 2020, SoFi’s shares outstanding count hit 116.2 million. A year later, this metric ballooned to over 828 million. With myriad headwinds built into the economy, now might not be the best time to speculate on dilutive investments.
On the date of publication, Josh Enomoto 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.