Reddit Stocks: What meme stocks are trending today? – July 21, 2023

US futures

• Dow Jones Industrial Average is flat
• S&P 500 is up 0.3%
• Nasdaq 100 is up 0.6%

US indices are licking their wounds and recovering some of the ground lost yesterday as an extreme selloff in Tesla and Netflix, which both suffered their sharpest one-day falls of 2023 in wake of their results, dragged down markets and sparked concerns that this earnings season won’t be as good for tech stocks as hoped – especially with valuations sit much higher today than at the start of 2023.

Markets could also see an uptick in volumes as the special rebalance of the Nasdaq 100 will become effective when markets open on Monday. This is designed to address the over-concentration of the largest stocks in the index following the surge in value we have seen this year. The five largest constituents – Microsoft, Apple, NVIDIA, Amazon and Tesla – currently account for over 44% of the index and that surpass 55% when Alphabet and Meta are included! The rebalance will reduce their weightings and is forecast to boost the likes of Starbucks, Booking Holdings and Mondelez. The rebalance means portfolios will be adjusted and will result in the Nasdaq 100 being less exposed to tech and give a greater weighting to other sectors, such as consumer discretionary.

Most discussed Reddit stocks

Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:

1. Tesla
2. Visa
3. NVIDIA
4. Carvana
5. C3.ai
6. Netflix
7. Sirius XM Holdings
8. AMD
9. Rivian
10. Amazon

Most active US stocks before the bell

Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:

1. Tesla
2. Sirius XM Holdings
3. Nikola
4. Rivian
5. Lucid
6. Palantir
7. IonQ
8. Soundhound AI
9. Carvana
10. NVIDIA

US premarket winners and losers

Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:

Top US stocks to watch

Tesla is up 0.8% at $266.40. The electric carmaker plunged 9.7% yesterday, marking the biggest one-day fall of 2023 as investors fret more price cuts are to come and that margins may not have bottomed-out as hoped. That, in turn, is also raising the pressure on Tesla to advance its self-driving technology that is already many years behind schedule. You can find out more in Tesla Stock Falls as Price Cuts Hurt Margins. While markets focused on their profitability concerns over the short-term, brokers kept their eye on Tesla’s increasingly exciting long-term outlook and continued to hike their target price on the company. Daiwa Capital Markets upped its view to $290 from $285 following the hikes we saw yesterday, when Deutsche Bank raised its view to $300 from $270, Piper Sandler to $300 from $280, while Wedbush maintained its more bullish view after hiking its target to $350!

Smaller electric vehicle maker Rivian is up 1.3% at $26.14 and set to test 2023-highs today. The company took a knock after Tesla produced its first Cybertruck and Ford slashed the price of its F-150, promoting concerns that may lure buyers away from the R1T. However, the stock rebounded over 4% yesterday after Mizuho raised its target price to $30 from $27.

Netflix is up 0.2% after it too experienced its sharpest one-day fall of 2023 yesterday when it sank over 8% in wake of its latest results. Netflix’s password crackdown led to it adding 6 million subscribers in the second quarter, over three times as many subscribers than Wall Street expected. But revenue growth was tepid and the amount of money it is making from each user is dwindling, which also caused its sales outlook for the third quarter coming in soft. The bar was high for Netflix considering the stock had risen around 67% since the start of the year before the results, having recovered some ground following the selloff we saw in 2022. Netflix admitted it needs to accelerate revenue growth and that heightens the need for its new ad-supported tier to perform. Markets may have got too excited too quickly considering management has consistently warned it will take time for its dual-pronged strategy of password policing and advertising to take-off. Brokers remained bullish on Netflix’s prospects and raised their target prices yesterday while markets focused on the weak short-term outlook that failed to support its loftier valuation.

AMD is up 0.4% and rebounding form July-lows this morning. CEO Lisa Su said ‘AI is the highest priority for the company’ and said there is room for more than one winner, with NVIDIA having stolen all the limelight after carving out an early lead in the space. Su also signalled the chipmaker is looking to reduce its dependence on Taiwanese firm TSMC during a visit to Tapei, according to Nikkei Asia, and is considering using other foundries to ensure it has a more diverse supply chain. Still, Su admitted it is hard to find another firm capable of helping it with its most advanced chips. AMD hopes to utilise TSMC’s overseas factories, including a new one being built in the US – although that has just been delayed.

NVIDIA is up 0.6% following the broader selloff in tech stocks yesterday, which prevented it from benefiting from more price hikes from brokers and news that Tesla CEO Elon Musk said the carmaker will take NVIDIA hardware as fast as it can deliver it. Tesla is using NVIDIA hardware to help make its AI ambitions become a reality and advance its self-driving technology and the comments suggest demand for AI chips is far outpacing supplies.

Attention is also starting to turn to biggest tech stocks as their earnings start to come in next week, when we will have results out from Microsoft, Alphabet and Meta before Apple and Amazon follow the week after. They are expected to report growth in earnings while the broader S&P 500 is on course to suffer its sharpest drop in earnings in three years, suggesting they could come to the rescue of markets once again. However, Wall Street has incorrectly predicted that earnings have bottomed-out in recent quarters, although easier comparatives make this less likely this time around. Still, valuations are far loftier than at the start of the year and these will be tested this season. As evident from Tesla and Netflix this week, it is not taking a lot to disappoint the markets. That could also heighten the pressure on them to unleash AI catalysts as quickly as possible, having so far failed to provide much of a boost to valuations. Find out everything you need to know in our Big Tech Q2 Earnings Preview.

Microsoft is up 0.5% while Activision Blizzard is marginally higher at $92.33, close to the $95 offer price. The chief executive of the UK’s Competition & Markets Authority, Sarah Cardell, denied claims the regulator was forced to reconsider the $69 billion combination of the two companies after other global regulators approved the deal. Cardell said the CMA was clear that there were ‘serious concerns from this transaction’. The CMA is now the only regulator left to approve the deal and Cardell said that it could still be blocked, although it is thought to have warmed to the idea following more remedies being offered. The Federal Trade Commission in the US is also appealing a court decision that the combination will not significantly hurt competition.

American Express is down 3.2% and at a one-week low as revenue fell short of expectations in the latest quarter while provisions put side because of the uncertain economic outlook almost trebled. Revenue rose 12% to $15.05 billion but this was below the $15.36 billion forecast. Still, consumer card spending hit record highs! EPS of $2.89 was welcome compared to the $2.81 prediction from Wall Street as costs increased at a slower pace than anticipated. Provisions jumped to $1.2 billion from just $410 million last year, showing that it is becoming more pessimistic about the economic picture. It reiterated its full year outlook.

Visa is down 0.6% before the bell and Mastercard is broadly flat. Both of the payment processors are scheduled to report earnings next week. The determination of consumers to keep travelling regardless of the economic climate should keep cross-border transactions elevated, countering the cooling spending in the US. Both are forecast to report higher sales and profits, although Mastercard’s growth is expected to outpace that of Visa.

JPMorgan is trading marginally higher today and testing fresh 17-month highs after CEO Jamie Dimon said it will be expanding its online bank Chase to Germany and other European countries during an interview with Handelsblatt. That would follow on from the expansion into the UK back in 2021.

Sirius XM Holdings popped over 42% yesterday and trading volumes spiked to over 127 million shares from just 30 million the day before – marking the busiest trading day since the start of 2021. That may have been the result of a short-squeeze considering short interest stands at over one-third of its float. However, the stock is reversing today and is down 7.8% at $7.14 after brokers warned the stock company has become overvalued following yesterday’s surge. Evercore ISI said the move makes it ‘by far the most expensive stock in our US cable and telecom coverage universe’ as it set a price target of just $4.50, while Pivotal said investors need to focus on the fundamentals as it too set a $4.50 price target.

Carvana is down 1.7% at $45.63 and building on yesterday’s losses. The rally that sent the stock to 14-month highs this week appears to have run out of steam, demonstrated by the steep fall in volumes yesterday. More brokers hiked their target price on the used car retailer this morning as markets grow confident it can make a comeback after positing a surprise positive adjusted Ebitda and announced a deal to restructure its debt. Citigroup upped its view to $50 while Piper Sandler raised its view to $48 from $29, but cut it to Neutral following the recent surge.

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