The so-called “meme stock” mania fueling the U.S. retail trading surge has been one of the most covered stories in the past few months. It has led to the resurfacing of the stonks meme, which first appeared back in 2010.
The stonks meme has become hugely popular in the discussion surrounding shorted or meme stocks for the past decade. Hence, the Reddit-induced short squeeze has caught several meme stocks apart, from video games retailer GameStop.
A meme stock doesn’t fall into any particular stock classification. They are typically trading at a premium and experience massive spikes in a short time. Moreover, these stocks are popular among millennials and in retail trading. They often do not possess the financials to justify their price, and FOMO is usually a significant motivator to buy. The recent retail trading frenzy, with more work-from-home (WFH) traders, has cast a spotlight on several meme stocks, from which investors could rake in considerable short-term gains.
Let’s look at seven meme stocks that you shouldn’t miss this time:
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Movie theatre operator AMC Entertainment has been given a lifeline due to the short squeeze. 2020 was a horrible year for the company, with the lockdown restrictions in place and film studios opting for an streaming release. Even with the re-opening of theatres and the economy in general, the film industry is at an inflection point that will shape AMC stock for years to come.
AMC stock’s year-to-date gains are over 321% which makes it a great short-term trading vehicle. However, it has little value for long-term investors, with its massive debt burden and its growing share count. On top of that, the movie release schedule remains unclear despite most of its theatres being open. Therefore, AMC stock is not a name to think about as a long-term play at this time.
Video-game retailer GameStop has been at the center of the Reddit-stoked short squeeze. The phenomenon has helped GME stock gain more than 3,000% in the past 12-months. However, with minimal growth at the company and a lack of long-term catalysts, the stock is highly unattractive to rational investors.
The company seeks to evolve its business model in line with the paradigm shift in the industry from physical to digital sales. Digital game sales exceeded physical game sales for the first time during the pandemic. It is a trend which will continue to stick, and company’s such as GameStop need to move along with it to stay afloat. It recently struck a deal with Microsoft (NASDAQ:MSFT) in getting a cut from the Xbox’s digital sales. However, with game developers offering their subscriptions, it would be tough to see how GameStop factors in the equation.
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Headphone maker Koss Corporation is another stock with little fundamental value that’s caught on to the short squeeze. KOSS stock has grown over 1,100% in the last 12 months, but its financials can hardly justify such an ascent. It has been a micro-cap stock for much of its history, averaging a negative 3.6% five-year return on equity. Moreover, despite its deplorable results, it dwarfs its competitors across most price metrics.
It recently released its second-quarter results for fiscal 2021, coming in ahead of expectations. The growth in revenues was primarily driven by the pandemic, which is a tail-wind that should fade away soon. It recorded net income of $509,000 which was mostly due to it recording a $506,700 Paycheck Protection Program (PPP) loan as other income. Therefore, with no growth drivers, KOSS stock is an incredibly risky investment.
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Express Inc. is an accessories and apparel retailer primarily operating in the United States and Puerto Rico. It currently operates 378 retail stores and 214 factory outlet stores. The company has had a torrid 2020, with revenue growth declining by double-digits. The short squeeze has kept EXPR stock alive, though, with year-to-date gains at 170%.
In its most recent quarter, revenues tumbled 34%, with a $1.17 per share loss. The company’s poor results are primarily due to its heavy dependence on foot traffic and its inability to adapt to changing customer tastes. Its e-commerce penetration is lackluster compared to its peers and can hardly offset its brick-and-mortar business losses.
Additionally, through the early half of the pandemic, from Feb. 1 to Oct. 31, it burned through $107 million in cash. On top of that, it has a whopping volume of long-term debt of $165 million. All of that makes EXPR stock’s future look incredibly bleak at this point.
Jaguar Health is a pharmaceutical company that has been making the rounds off-late due to two promising drug candidates’ announcements. One of these drugs could potentially relieve symptoms of diarrhea from cholera. The other could relieve gastrointestinal problems of people recovering from Covid 19. As a result, JAGX stock has a 12-month return of over 146.7%
The market for both its drug candidates is massive, but they need to prove their efficacy before being taken seriously. Trials have gone smoothly and have raised enough funds to see their development past the finish line. Therefore, the company could open up multimillion-dollar revenue streams down the road. At this point, though, it’s more of a speculative bet at best.
Canadian marijuana producer Sundial Growers has been one of the biggest beneficiaries of the retail-trading hysteria. SNDL stock had risen 338% in the past six months when it was restructuring its debt. The windfall has steered it out of its financial troubles, but its core business is a mess, offering little upside for investors.
The company has had a poor earnings track record marked by minimal growth in revenues and profits. Its sales mix is far from ideal due to its inferiority and the lack of distribution channels. The previous management team took Sundial in the wrong strategic direction. New management is doing its best to fix the mess, but it will be a long process to turn this ship around if it’s even possible at all.
Traders seem to think federal cannabis legalization in the United States will fix all these problems overnight. Even if legalization happens soon (which is far from guaranteed), it’s unclear how much this will help Sundial.
Its sizeable cash balance will allow it to expand its business in the U.S. and acquire other pot growers. It will be interesting to see how it progresses, but it’s a highly over-valued pot stock that offers little upside for the time being.
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Veterinary diagnostics company Zomedica has been one fastest growing stocks in the past year. The short squeeze has helped ZOM stock clock a year-to-date price gain of over 650%.
The company is developing a unique point-of-care diagnostic tool for gastrointestinal distress for cats and dogs. Its Truforma diagnostic platform has helped stoke ZOM stock ahead of its expected debut later this month.
CEO Robert Cohen recently talked about the massive strides the company has made in the past few months. ZOM stock has regained compliance with exchange listing requirements, and it expects to keep growing with the imminent release of its Truforma platform.
Additionally, Cohen states that the company should be cash flow positive by 2023. With a limited release this month, the platform will be released with multiple assays down the line. Hence, the stock has the potential to be an excellent investment soon.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. He does not directly own the securities mentioned above.
The post 7 Meme Stocks That Have Retail Traders ‘Stonk-ing’ Up appeared first on InvestorPlace.
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