Reddit stocks: what meme stocks are trending?

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Josh Warner
By : ,  Market Analyst

Top Reddit stocks to watch

Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours on June 24, 2022, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded. 

  1. Tesla
  2. Advanced Micro Devices
  3. GameStop
  4. FedEx
  5. Weber
  6. Jacobs Engineering Group
  7. Meta
  8. AMC Entertainment
  9. NVIDIA
  10. Apple

 

FedEx shares are up 2.7% at $234.20 before the bell after its outlook for the new financial year was rosier than anticipated, setting a buoyant tone ahead of an important event next week when its new CEO is set to outline his ambitions and stamp his authority on the business. The delivery giant said revenue rose over 8% to $24.4 billion in the fourth quarter, coming in just shy of the $24.5 billion pencilled-in by analysts. Adjusted EPS jumped 37% to $6.87 and came in bang on forecast. That meant annual revenue rose around 11.5% to $93.5 billion and adjusted EPS rose 13.5% to $20.61. It said it is initially targeting annual EPS of $22.50 to $24.50 per share in the new financial year, which impressed compared to the $22.46 anticipated by Wall Street. The results were well-received by brokers, with JPMorgan bumping-up its price target to $284 from $279 after the results to account for the improved outlook. Baird said FedEx’s ‘near-trough valuation reflects the low bar for performance, yet FedEx is set to deliver better relative growth over the next few years’. Raj Subramaniam took over as CEO at the start of June and FedEx will hold a meeting with investors and analysts on Tuesday June 28 to Wednesday June 29.

Meme stocks remain on the radar today. AMC Entertainment is up 0.7% in premarket trade today.

Meanwhile, Weber shares are down 0.7% after soaring higher in recent days amid speculation the barbeque company is the next stock to experience a short-squeeze. The barbeque company has seen its share price collapse since listing in August 2021 at $14 per share but the stock has rallied in last two days back to as high as $11.50. S3 Partners said yesterday’s rally caused short-seller mark-to-market losses of around $12 million, and reduced year-to-date profits into losses of around $450,000. ‘With added buy-side pressure from buy-to-covers and virtually no sell-side relief from short-selling Weber’s stock, price trajectory should continue a steady climb as long as long stock buyers remain active,’ said Ihor Dusaniwsky of S3 Partners.

Is GameStop now a value stock? The company, which is trading 1% higher today, is expected to be one of several companies set to join the Russell 1000 Value Index after the close today and see their weighting in the Russell 1000 Growth Index dwindle as the FTSE Russell rebalances its benchmarks. Other stocks reported to be joining the value benchmark, according to reports from the Wall Street Journal, include Meta, PayPal, Netflix, Okta, Pinterest, Zoom Video Communications and Moderna. The additions will be made partly because of the steep falls in value experienced by all these stocks in 2022 that has reduced their price-to-book ratios, while the weaker outlook has also diminished their growth prospects. That comes as markets have shunned high-growth stocks this year in favour of higher-quality value stocks that can provide reliable profits and cashflow during a downturn.

Meta CEO Mark Zuckerberg gave a rare interview to CNBC yesterday, which saw him defend the company’s strategy that is seeing the company fuel its lofty ambitions in the metaverse using the money made from its social media platforms. He said the company was hoping to get 1 billion people in the metaverse ‘doing hundreds of dollars of commerce’ like buying digital goods and content. He warned it would ‘take time to get there’ but pointed to the fact its current services are already running at a larger scale today. Zuckerberg also said the company’s advertising model, which drives the bulk of revenue, is being increasingly driven by Artificial Intelligence (AI) in an effort to compete better with the faster-growing rivals like TikTok. The stock is up 1.1% before the bell at $160.50. RBC cut its target price on the stock today to $200 from $240.

Tesla shares are up 0.7% this morning and remain in play following warnings from CEO Elon Musk that new factories are burning through billions of dollars as they struggle to ramp-up production because of supply chain problems, prompting him to warn that the ‘overwhelming’ concern is how it keeps the factories going, pay its staff and ‘not go bankrupt’. The comments were made on May 31, but the video was only released this week, when he said the cash burn at the new factories will ‘get fixed real fast’. That comes amid reports the company is planning to temporarily close its plant in China so it can upgrade lines and more than double the plant’s original capacity to 1 million cars per year. Credit Suisse cut its target price on the stock to $1,000 from $1,125 this morning

Apple shares are up 1% before markets open today. Data from Counterpoint Research released yesterday suggested Apple’s market share of the premium smartphone market rose to 62%, marking its highest level since 2017. The report said premium smartphone sales, accounting for those worth over $400, continued to outperform the lower end of the market for the eighth consecutive quarter in the first three months of 2022. Still, sales of premium phones fell 8% in the period.

Semiconductor stocks remain on the radar, with AMD trading 1.2% higher at $83.40. Morgan Stanley said earlier this week that the stock is Overweight as it resumed coverage and set a price target of $103, stating it believes it will continue to gain market share over the coming years and that the recent selloff has provided an attractive entry point. The broker believes AMD could be better positioned than rivals if there is any pullback in demand going forward. Fellow chipmaker NVIDIA is following 1.5% higher this morning.

 

Other US stocks to watch before the bell

United Airlines is up 1.3% today after becoming the latest airline to cut its flight schedule as congestion continues to hit airports. The company is temporarily cutting around 50 domestic flights per day from Newark airport starting in July. That represents around 12% of the 425 daily flights it usually runs out of the airport.

Tobacco stocks are on the rise today after the US Food & Drug Administration banned the sale of all Juul e-cigarettes after failing to convince the regulator that they are a net benefit to public health. That follows a review that has lasted over two years, during which the company was accused of fuelling an increase in the number of teenagers vaping. British American Tobacco, which is up 0.3% before the bell, is among those that have already successfully supplied evidence their next-gen products are appropriate. Other tobacco stocks to watch today include Philip Morris, which is up 1.4%, and Altria, which was upgraded to Equalweight by Morgan Stanley this morning and had its price target cut to $43 from $47, is up 1.2% at $43.

 

Broker rating changes

Becton Dickinson & Co has been upgraded to Overweight from Equalweight by Wells Fargo and had its price target reiterated at $275. The medical tech company is largely unmoved this morning at $242.50.

Progressive Corp has been upgraded to Market Perform from Underperform by KBW and had its price target reiterated at $107. The insurer is trading flat in premarket trade at $109.75.

Wolfspeed has been upgraded to Buy from Neutral by Goldman Sachs and had its price target reiterated at $108. The stock is up 4.9% today at $66.

Ameriprise Financial has been downgraded to Neutral from Buy by Goldman Sachs and had its price target cut to $270 from $325. The financial services firm is down 1.4% before the bell at $236.60.

Baxter International has been downgraded to Equalweight from Overweight by Wells Fargo and had its target price reiterated at $71. The healthcare stock is up 1% before markets open at $65.70.

 

How to trade Reddit stocks

You can trade many of the hot stocks being discussed on Reddit with City Index.

Follow these easy steps to start trading Reddit stocks today.

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
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The Reddit frenzy

Retail investors realised their potential power in early January 2021 when a loosely coordinated strategy was formed on Reddit’s WallStreetBets chatroom to buy shares and out-of-money call options on stocks that were being targeted by short-sellers to push the price higher. The idea was to create a short-squeeze.

 

What is a short-squeeze?

A short-squeeze does what it says on the tin – it tries to squeeze short-sellers out of their positions. Short-sellers, mostly big institutional investors and hedge funds, bet that the price of a stock will fall but, as retail investors pile in and push the share price higher, they are forced to start buying the stock to try to limit their losses. The buying by the big players only fuels the share price higher.

You can read more about short-squeezes and how they can be predicted here.

 

David vs Goliath

The fact many of the stocks being targeted are fundamentally flawed or failing adds increased risk into an already volatile picture. GameStop is an out-of-favour retailer that sells physical video games during a time when games are mostly being bought online, while others like Blackberry are also laggards from the past.

With this in mind, it is unsurprising they were in the crosshairs of short-sellers that look for failing companies to bet against.  

But why are retail investors banding together to buy shares in flawed companies? This disconnect is partly explained by a growing resentment among the smaller players in the market, which disagree with the idea of large institutions profiting from a company’s failure through short-selling practices, creating what has been described as a ‘David vs Goliath’ battle.

It is important to note that not all the most actively-discussed stocks on Reddit are struggling or being targeted by short-sellers. Many of the most mentioned stocks, like Apple, are simply popular among the community.

 

Reddit stocks and volatility

The stark movements in stocks like GameStop has demonstrated the power and influence that social media-driven investors and traders can have on the market, having injected severe volatility into several stocks. Volatility presents opportunities for traders, and it doesn’t get more volatile than Reddit stocks right now.

For example, we saw GameStop - the first heavily-shorted stock to be targeted by social media-driven investors - go from below $19 at the start of 2021 to a new record high of over $347 by January 27, and the share price has remained highly volatile ever since.

 

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