It’s the question everybody wants to know: Are meme stocks dead? Well, according to an August report from the Associated Press, apparently not. After trudging through a rough environment of stubbornly high inflation and the subsequent rise in borrowing costs, retail investors may be ready for another bite at the apple before year’s end.
To be sure, you don’t want to jump into any trade that happens to be gaining favor at the moment. Looking at the prior hot plays among meme stocks to buy, quite a few have lost their luster. Seemingly, the beneficiaries of the craze have slipped out the back, leaving many holding a bag of excrement.
No, this time, you want to be judicious with your speculation. While these tickers may have attracted the attention of the crowd, they also enjoy Wall Street’s backing. In addition, they may enjoy favorable options dynamics and for a quick guide, please refer to this article.
With that, below are meme stocks that could actually rebound in the final quarter.
Take-Two Interactive (TTWO)
A video game holding company, Take-Two Interactive (NASDAQ:TTWO) owns two major publishing labels, Rockstar Games and 2K. It’s known for some of the most popular franchises, including Grand Theft Auto and the Red Dead series. Since the beginning of this year, TTWO gained 38% in value. On Thursday, shares closed at $142.23.
Shifting gears to the options arena, TTWO’s volatility smile — or implied volatility (IV) plotted at various strike prices — suggests intense interest or anticipation the further out the money (OTM) the price spectrum goes. IV sits at a low of 0.23 at the $155 strike. From there, it skyrockets to 0.42 at the $190 strike.
Moving toward the deep in-the-money (ITM) zone — that is, to the left — IV peaks at 0.28 at the $115 strike. Therefore, traders might not be anticipating much downside risk. Also, due to the spiked IV toward the far OTM side, institutional traders appear to be selling puts (which have a bullish implication) to collect the rich premiums.
Finally, analysts peg TTWO as a unanimous Strong Buy with a $160.93 price target, implying a 13% upside.
Moderna (MRNA)
A biotechnology firm, Moderna (NASDAQ:MRNA) came to prominence during the height of Covid-19 fears. However, following the distribution of its Covid vaccine, fading fears of the SARS-CoV-2 virus basically cratered MRNA. Since the January opener, shares stumbled more than 39%. On Thursday, MRNA closed at $108.35.
Despite the red ink, MRNA could be one of the meme stocks to buy for speculators. Looking at its volatility smile, IV falls to a low point of 0.44 at the $110 strike. Toward the far OTM direction, IV jumps to 0.69 at the $170 strike. The gradual rise in volatility suggests anticipation of a broader bounce back as one possibility.
Still, moving toward the deep ITM direction, IV peaks at 0.76 at the $65 strike. Here, it seems traders are accounting for tail risk (i.e., black swan event). Due to the heightened IV at both ITM and OTM ends, institutional traders have sold puts and calls.
Ultimately, though, it’s possible that MRNA could swing higher. Analysts peg the stock as a Moderate Buy with a $167.79 target, implying a nearly 55% upside.
Quad/Graphics (QUAD)
Headquartered in Sussex, Wisconsin, Quad/Graphics (NYSE:QUAD) is a commercial printing company. Per its public profile, Quad/Graphics offers marketing strategy and management services. Given the unknowns surrounding the media space, QUAD seems risky, even as one of the meme stocks. Still, since the January opener, shares gained 14% of equity value. On Thursday, QUAD closed at $4.98.
Looking at its volatility smile, IV sits at a low of 0.57 at the $5 strike price. Moving in the far OTM direction, IV jumps to 1.18 at $7.50, then to 1.88 at $10. To be fair, it’s difficult to assess sentiment based on QUAD’s limited derivatives profile. Still, it’s reasonable to assume that at least some traders believe in its long-term upside potential.
On the other end, IV soars to 2.49 at the $2.50 strike. There’s no way around it — QUAD presents high risks, again in part because of the media landscape uncertainty.
In closing, Barrington analyst Kevin Steinke pegs QUAD a Buy with a $9 forecast, implying nearly 81% growth. Therefore, it may be one of the meme stocks to buy for gamblers.
On the date of publication, Josh Enomoto did not hold (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.
