Meme stocks might not be a buy right now but these speculative plays are known for high levels of unpredictability because they can rally or crash in any market, and at any time. Their meteoric rises and heart-stopping crashes typically depend on social-media hype and online interest.
These stocks do follow traditional investment wisdom, which says you should buy stocks based on strong growth and performance records.
But memes are also characterized by frenzied price action in certain types of highly-popular stocks, causing prices to rise by 1,000% or more in a very brief time. And they can crash just as quickly.
Hyper-stock valuations for these companies depend, for the most part, on young fans and an anonymous following that can appear or disappear overnight.
Top Meme Stocks to Watch
What are the top meme stocks to watch?
Tesla (TSLA) is the top-trending stock on a popular social media site. But is it a meme stock?
From June 2019 to November 2021, the stock rose 2460%, lifting from 14.90 to 381.50.
The hype had a lot to do with CEO Elon Musk’s massive social media following, as well as speculative plays on Bitcoin and Bitcoin’s meme, Dogecoin.
In February 2021, Tesla bought $1.5 billion Bitcoin and started to accept auto purchases in the digital asset. The crypto had a wild run-up after the news while Tesla’s earnings for the quarter showed a tidy profit from the crypto’s growth.
In fact, out of $438 million net income for the quarter, Bitcoin sales comprised $101 million, or about one-quarter.
TSLA stock posted the strongest 12-day gains in its public history in October and November 2021. In January this year, Tesla also started to accept top meme coin, Dogecoin, for select purchases.
After the merger with Twitter, Dogecoin has seen a further spike. From 11 cents on October 30, the coin has surged to 15 in two days.
Wendy’s (WEN) became a meme stock in June 2021. Shares rose 16% after the ticker became a favorite on online forums for a brief period.
United States Steel (X), Uber (UBER) and DTE Energy (DTE) are other worthy mentions for meme rallies. United States Steel would be a play on the current weakness in steel stocks; Uber has become a hot favorite after its recent resounding earnings wins while DTE has partnered with Ford Motors for renewable energy in Michigan.
GameStop, Bed Bath & Beyond, AMC
GameStop (GME) ranks as another popular meme stock.
The video game retailer grew a fan base in late 2020. In January 2021, the stock shot up 1,625% to 81.25 and then crashed to 15 in February. However, it climbed back up to 265 by mid-March.
Notably, $2.25 billion in net sales reported that quarter marked just modest growth from 2020, suggesting the parabolic rally had nothing to do with fundamentals.
The decline and fall of Bed Bath & Beyond (BBBY) is perfect example of meme mania.
The meme stock rose over 200% to 53.90 in January 2021 and settled back to long-term averages for the rest of the year. It then spiked more than 30% to $30.06 in March 2022, with frenzied buying after Ryan Cohen bought a 9.8% stake.
Shares then crashed in August after he exited his position. However, the company managed to raise capital to stay in business, inducing shares to surge 89% to 9.53 before diving again in September.
AMC Entertainment’s (AMC) AMC Preferred Equity (APE) share offering in August 2022 set off a big meme rally. The movie chain incurred massive debt during the pandemic and wants to use the new shares to pay down loans. Just last week, the company filed to sell 425 million APE shares to improve its balance sheet.
Nio’s Surprising Meme Rally May Repeat
Chinese EV company Nio (NIO) is known to investors for its strong fundamentals but this automaker is not immune to meme action.
NIO shares were worth just $4 in early 2020. In October 2020, its popularity on social media channels triggered a massive rally, lifting the meme stock to 57.20, more than a whopping 1250% advance.
Meme stocks will be around as long as social media continues to impact markets. It is important for investors to understand the highly-erratic price action of these stocks often has nothing to do with fundamental or technical ratings.
At a minimum, these high-risk speculative plays require strong risk management skills and a willingness to place aggressive stop losses.
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