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Meme Stocks Luring Again: Don't Make Hasty Decisions
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Markets are trying to recover from the bloodbath suffered during the first half of the year. July was one of the better months, with markets recovering from their earlier lows after data remained unchanged for the month. However, inflation is still high and all three major indexes are still down for the year.
To put it in simple words, the crisis is far from over and the Fed is gearing up for yet another rate hike in September, after increasing interest rates by 225 basis points this year. Despite the bearish sentiment, a few stocks have been swimming against the tide. These stocks, dubbed meme stocks, have seen an astounding surge lately.
Meme Stocks Making Another Comeback
Meme stocks were stock market darlings last year, with some stocks surging as much as 200%. And this happened at a time when the global economy was still reopening after almost closing down due to the pandemic.
The first half of this year didn’t see much hype around meme stocks but last month saw a resurgence mainly because of easing inflation, plunging commodity prices and a decline in Treasury yields.
Meme stocks are those that attract a great deal of investor attention because of a buzz on social media and online discussion boards like Reddit, WallStreetBets and Robinhood. They don’t follow the conventional route where an investor judges a stock by the company’s fundamentals, leading to an increase in volumes and share price. Instead, the surge is triggered by hedge fund giants that create a short squeeze on the stock via social media forums.
Retail investors have a negative outlook on meme stocks because of their extensive shorting. When retail investors buy lumpsum amounts of these cheap stocks, their share prices surge overnight. Institutional investors, particularly hedge funds, start short-covering when these companies’ prices begin to rise to keep the balance of their portfolios. As a result, the value of these stocks soars.
Risky Bet
Investing in meme stocks involves high risk as a decision taken impulsively on the basis of social media popularity can backfire. Moreover, most meme stocks have negative earnings growth estimates or very poor revenue growth. The revenue growth rate can also be negative. These are a few explanations as to why institutional investors have shorted these equities so extensively.
In fact, meme stocks have taken a beating over the past week after making a resurgence last month. On Aug 22, shares of AMC Entertainment Holdings, Inc. (AMC - Free Report) plummeted 31% after investor skepticism about its recent rally caused a dramatic decline. The decline came after UK-owned rival Cineworld, which operates Regal Cinemas in the United States, warned that it could go for a bankruptcy filing. AMC has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of AMC had surged more than 150% since the end of 2019 and even managed to raise $1.8 billion in loans but plummeted on a social media frenzy. Other meme stocks, too, have been taking a beating lately, which is yet another alarm bell for those who often get tempted by their sudden surge.
4 Meme Stocks Creating Noise
Rocket Companies, Inc. (RKT - Free Report) , the holding company consisting of personal finance and consumer service brands, including Rocket Mortgage, Rocket Homes, Rocket Loans, Rocket Auto, Rock Central and Amrock, posted disappointing second-quarter 2022 results. RKT’s expected earnings growth rate for the current year is -93.4%.
According to our most recent prediction, the company will incur huge losses in 2022. The stock currently has a Zacks Rank #4 (Sell). However, RKT’s stock price has increased by 14.7% over the past 30 days.
Bed Bath & Beyond Inc. , the specialty retail store operator and one of the most talked-about meme stocks on Reddit’s WallStreetBets chat room, surged 102.7% over the past 30 days despite plummeting more than 50% last week after billionaire investor Ryan Cohen sold off his entire stake in the company.
Interestingly, BBBY once again surged 15% on Aug 23 after the company reportedly secured a new loan. However, Bed Bath & Beyond came up with disappointing first-quarter fiscal 2022 results, with both top and bottom lines not only missing their respective Zacks Consensus Estimate but also declining year over year. The current Zacks Consensus Estimate for 2022 earnings per share growth is more than -100%.
Our current projection indicates that the company will incur losses in 2022. Bed Bath and Beyond carries a Zacks Rank #4.
Snap Inc. (SNAP - Free Report) posted disappointing second-quarter 2022 results, wherein the company reported a loss of 2 cents per share. Snap’s expected earnings growth rate for the current year is more than -100%.
According to our most recent prediction, SNAP will incur huge losses in 2022. SNAP currently has a Zacks Rank #4. However, SNAP’s stock price has climbed 9.1% over the past 30 days.
Roku, Inc. (ROKU - Free Report) , the leading TV streaming platform provider in the United States based on hours streamed, posted disappointing second-quarter 2022 results. ROKU reported a loss of 82 cents per share, wider than the Zacks Consensus Estimate of a loss of 78 cents. The current Zacks Consensus Estimate for 2022 earnings per share growth is negative.
Our current projection indicates that the company will continue to incur losses in 2022. ROKU has a Zacks Rank #4. Yet, ROKU’s shares have soared 22.3% in the past month.
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Meme Stocks Luring Again: Don't Make Hasty Decisions
Markets are trying to recover from the bloodbath suffered during the first half of the year. July was one of the better months, with markets recovering from their earlier lows after data remained unchanged for the month. However, inflation is still high and all three major indexes are still down for the year.
To put it in simple words, the crisis is far from over and the Fed is gearing up for yet another rate hike in September, after increasing interest rates by 225 basis points this year. Despite the bearish sentiment, a few stocks have been swimming against the tide. These stocks, dubbed meme stocks, have seen an astounding surge lately.
Meme Stocks Making Another Comeback
Meme stocks were stock market darlings last year, with some stocks surging as much as 200%. And this happened at a time when the global economy was still reopening after almost closing down due to the pandemic.
The first half of this year didn’t see much hype around meme stocks but last month saw a resurgence mainly because of easing inflation, plunging commodity prices and a decline in Treasury yields.
Meme stocks are those that attract a great deal of investor attention because of a buzz on social media and online discussion boards like Reddit, WallStreetBets and Robinhood. They don’t follow the conventional route where an investor judges a stock by the company’s fundamentals, leading to an increase in volumes and share price. Instead, the surge is triggered by hedge fund giants that create a short squeeze on the stock via social media forums.
Retail investors have a negative outlook on meme stocks because of their extensive shorting. When retail investors buy lumpsum amounts of these cheap stocks, their share prices surge overnight. Institutional investors, particularly hedge funds, start short-covering when these companies’ prices begin to rise to keep the balance of their portfolios. As a result, the value of these stocks soars.
Risky Bet
Investing in meme stocks involves high risk as a decision taken impulsively on the basis of social media popularity can backfire. Moreover, most meme stocks have negative earnings growth estimates or very poor revenue growth. The revenue growth rate can also be negative. These are a few explanations as to why institutional investors have shorted these equities so extensively.
In fact, meme stocks have taken a beating over the past week after making a resurgence last month. On Aug 22, shares of AMC Entertainment Holdings, Inc. (AMC - Free Report) plummeted 31% after investor skepticism about its recent rally caused a dramatic decline. The decline came after UK-owned rival Cineworld, which operates Regal Cinemas in the United States, warned that it could go for a bankruptcy filing. AMC has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of AMC had surged more than 150% since the end of 2019 and even managed to raise $1.8 billion in loans but plummeted on a social media frenzy. Other meme stocks, too, have been taking a beating lately, which is yet another alarm bell for those who often get tempted by their sudden surge.
4 Meme Stocks Creating Noise
Rocket Companies, Inc. (RKT - Free Report) , the holding company consisting of personal finance and consumer service brands, including Rocket Mortgage, Rocket Homes, Rocket Loans, Rocket Auto, Rock Central and Amrock, posted disappointing second-quarter 2022 results. RKT’s expected earnings growth rate for the current year is -93.4%.
According to our most recent prediction, the company will incur huge losses in 2022. The stock currently has a Zacks Rank #4 (Sell). However, RKT’s stock price has increased by 14.7% over the past 30 days.
Bed Bath & Beyond Inc. , the specialty retail store operator and one of the most talked-about meme stocks on Reddit’s WallStreetBets chat room, surged 102.7% over the past 30 days despite plummeting more than 50% last week after billionaire investor Ryan Cohen sold off his entire stake in the company.
Interestingly, BBBY once again surged 15% on Aug 23 after the company reportedly secured a new loan. However, Bed Bath & Beyond came up with disappointing first-quarter fiscal 2022 results, with both top and bottom lines not only missing their respective Zacks Consensus Estimate but also declining year over year. The current Zacks Consensus Estimate for 2022 earnings per share growth is more than -100%.
Our current projection indicates that the company will incur losses in 2022. Bed Bath and Beyond carries a Zacks Rank #4.
Snap Inc. (SNAP - Free Report) posted disappointing second-quarter 2022 results, wherein the company reported a loss of 2 cents per share. Snap’s expected earnings growth rate for the current year is more than -100%.
According to our most recent prediction, SNAP will incur huge losses in 2022. SNAP currently has a Zacks Rank #4. However, SNAP’s stock price has climbed 9.1% over the past 30 days.
Roku, Inc. (ROKU - Free Report) , the leading TV streaming platform provider in the United States based on hours streamed, posted disappointing second-quarter 2022 results. ROKU reported a loss of 82 cents per share, wider than the Zacks Consensus Estimate of a loss of 78 cents. The current Zacks Consensus Estimate for 2022 earnings per share growth is negative.
Our current projection indicates that the company will continue to incur losses in 2022. ROKU has a Zacks Rank #4. Yet, ROKU’s shares have soared 22.3% in the past month.