Reddit stocks: what stocks are trending?
Joshua Warner July 30, 2021 11:55 AM
Reddit has become a hub for social-media driven traders and investors that have proven their ability to move the markets, injecting huge volatility into stocks like GameStop and AMC. But what stocks are grabbing attention on Reddit today?
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 July 30, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.
- Advanced Micro Devices
- AMC Entertainment
Robinhood shoots straight to the top of the table of most-discussed stocks after completing its IPO yesterday and ending down on its first day of trading. The IPO price of $38 was already at the low end of its price range and ended at below $35 by the end of the day, as concerns over regulatory pressure and investigations overshadowed the strong user growth the trading platform is delivering.
Amazon has also come into play following its quarterly results were released after the markets closed yesterday. The company’s revenue growth disappointed but EPS of $15.12 came in well ahead of the $12.28 expected by analysts. The disappointment came from its outlook when it said third quarter revenue would be between $106 and $112 billion compared to the $118 billion forecast by Wall Street. That signals growth will slow for the remainder of this year but remain well above pre-pandemic levels.
AMD shares surged higher yet again yesterday to close at a new record high, building on the gains booked since releasing results earlier this week that beat expectations and buoyed beliefs it is capturing market share from rival chipmakers.
Tilray continues to grab attention after posting a surprise quarterly profit this week and said it is on course to deliver $4 billion in annual revenue by 2024 following its mega-merger with Aphria to make it the world’s largest-listed cannabis company. Alliance Global Partner cut its target price to $17 from $18 yesterday, with Tilray shares having closed at $15.14 at the end of play on Thursday.
Tesla shares jumped 4.7% yesterday and closed a two-and-a-half week high. Reports broke today that suggested Tesla had decided to cut the price of key models in China, a key market for the company, and there was separate news that a fire has broken-out at its ‘Megapack’ battery trial in Australia.
GameStop shares closed down for their third consecutive session yesterday and have now almost halved in value since peaking in June. AMC shares also remain in play and remain over 47% lower than their June peaks.
Cleveland-Cliffs shares closed over 5% higher yesterday to hit a fresh all-time high, having rallied for nine consecutive sessions. The company bought back shares in the business held by ArcelorMittal for $1.2 billion earlier this week and Moody’s affirmed it won’t impact the stock’s ratings. Citigroup also hiked its price target on the stock to $34 from $22 yesterday, with shares last closing at $24.85.
Pinterest shares sank over 6% on Thursday after releasing second quarter results. Revenue more than doubled year-on-year and monthly active users grew 9% to 454 million. It also booked a profit following losses last year. That beat analyst expectations but the stellar results were overshadowed by warnings topline growth will slow to around the low 40%s in the third quarter from 125% in the second. A number of brokers slashed their price target on the stock following the update, although the average $78.4 is still some 8.8% higher than the current share price.
Facebook remains under the spotlight after revealing profits more than doubled in its latest quarter in an update earlier this week, which was overshadowed by warnings that growth is expected to slow over the next six months as the economy reopens and people spend less time online. UK regulators formally opened up an investigation into Facebook’s acquisition of Kustomer today.
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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.
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 – even during a pandemic.
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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