Reddit stocks: what meme stocks are trending?

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 June 28, 2022, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded. 

  1. Nike
  2. Tesla
  3. Robinhood
  4. AMC Entertainment
  5. GameStop
  6. Apple
  7. Digital World Acquisition Corp
  8. JPMorgan
  9. Evofem Biosciences
  10. Visa

 

Nike shares are down 2.3% this morning at $107.96 after its outlook for disappointed the markets as it continues to struggle in China, where pandemic-induced disruption continues. The athleisure giant said sales would be broadly flat to slightly higher in the first quarter of its new financial year, which disappointed compared to the 5.1% growth pencilled-in by analysts. Sales dropped 20% at constant currency in China during the fourth quarter, as lockdowns and Covid-19 restrictions plagued both demand and supply. Inventory levels also continued to soar, rising 23% in the latest quarter, as it continues to take longer to shift goods and get them out of congested ports. Sales were down 1% in the fourth quarter to $12.2 billion, coming in-line with expectations, while EPS of $0.90 was lower than last year but better than the $0.84 pencilled-in by analysts. Nike said sales would grow by a low double-digit percentage over the full year and said its margin will largely hold steady. A number of brokers cut their price target on Nike after the results, including Cowen & Co to $127 from $133, Jefferies to $155 from $185, JPMorgan to $130 from $132 and Wedbush to $130 from $139.

Tesla shares are up 0.8% before the bell at $740.78. Mizuho cut its target price on the electric carmaker to $1,150 from $1,300 yesterday, but maintained its Buy rating and said it believes the company will remain the leader in the market thanks to its focus on new battery technology, self-driving systems and its growing presence in the energy storage industry. Meanwhile, Electrek reported the company has had to pause deliveries of some Model Ys built at its new factory in Germany due to a fault with the electric motor. The problem is thought to be specific to the Performance version of the car.

Apple shares are up 0.6% in premarket trade today. The US Supreme Court yesterday rejected Apple’s request to revive a dispute with Qualcomm. The two have been locked-in a battle for years after Qualcomm sued Apple back in 2017 after alleging that iPhones, iPads and Apple Watches infringed on its patents. That was settled in 2019 after the pair struck a deal that would allow Apple to continue using Qualcomm’s chips in its devices and gain access to a wider pool of licensed patents, but the iPhone maker is now thought to be trying to restart a battle over fears about what could happen after the existing agreement expires in 2025 or 2027, depending on whether it is extended. Qualcomm shares are up 1.4% this morning.

JPMorgan shares are up 0.9% before markets open today after the bank said it plans to maintain its dividend at $1 per share in the third quarter of 2022, ‘in light of higher future capital requirements’. The latest round of stress tests revealed some banks, including JPMorgan, will need to increase their capital buffers, which could limit the growth seen in returns to shareholders. Citigroup also said it would keep its dividend flat for the same reason. That compared to rivals Morgan Stanley, Goldman Sachs, Bank of America and Wells Fargo – all of which raised their dividends yesterday.

Visa shares are trading broadly flat in premarket trade today. It announced yesterday that James Hoffmeister will become the chief financial officer of Visa Europe on July 1. He is moving from his existing role as senior vice president, corporate controller and chief accounting officer, which is now being taken on by Peter Andreski, who has been in charge of revenue since 2019.

Evofem Biosciences is a new entry and up over 38% before the bell today at $1.48. The company, which makes a breakthrough prescription contraceptive vaginal gel for women, has exploded in value since the US Supreme Court overturned Roe vs Wade to dramatically change the landscape for abortions across the country. Evofem Biosciences said this morning that it has struck a deal to supply millions of doses of its gel named Phexxi to one of the largest managers of pharmacies. It said the move would also allow it to save some $400,000 before the end of 2022, and $1 million on an annualised basis.

Digital World Acquisition Corp, or DWAC, continues to languish near record lows and is up 0.2% this morning at $25.28 as its hopes of merging with former president Donald Trump’s social media company continues to be tested. The company said its directors have been subpoenaed by the Southern District of New York, requesting some of the same documents requested for by the SEC concerning the due diligence over its proposed merger with Trump Media & Technology Group, or TMTG, and for evidence that it considered other targets. Also, Bruce Garelick resigned from the board yesterday, although DWAC said he ‘stated that his resignation was not the result of any disagreement with Digital World’s operations, policies or practices.’

Robinhood shares are down 3% before markets open today after popping 14% higher yesterday on rumours that crypto exchange FTX is preparing to launch a takeover bid for the company. FTX is run by Sam Bankman-Fried, who said in an emailed statement to Reuters that that it could end up seeing FTX partner with Robinhood and stated ‘there are no active M&A conversations with Robinhood’.

Other meme stock favourites also remain in play today, with GameStop up 0.7% and AMC Entertainment trading 1.3% higher.

 

Other US stocks to watch before the bell

Pinterest, Airbnb, UPS and Amazon’s Twitch video streaming service have all be hit by fines in Russia for refusing to store data on its citizens inside the country. All of them were fined 2 million roubles, roughly around $37,700, except for UPS which was hit with a smaller 1 million rouble fine. Still, all four stocks are trading higher before the bell today. There are other cases open against the likes of Apple and Alphabet’s Google was fined some 15 million roubles last month.

Staying with Airbnb, the stock is up 1.5% before the bell after announcing it plans to make its ban on parties being held in its host’s properties will become permanent after seeing a notable drop in the number being held since introducing a temporary ban during the pandemic.

Microsoft shares are up 0.6% in premarket trade after reports suggested investors are pushing for the company to be more transparent with its tax and financial information by filing a shareholder resolution ahead of this year’s AGM calling on the firm to publish the data on country-by-country basis. Proxy adviser Pensions & Investment Research Consultants is leading the charge on behalf of other investors including Nordea, Greater Manchester Pension Fund and AkademikerPension.

Shopify is in play today as it prepares to become the latest company to complete a stock split on a 10-for-1 basis. The new shares are being distributed to shareholders that were on the register on June 22 and will start trading on a split-adjusted basis tomorrow. Stock splits reduce the value of each individual share, but do not change the underlying prospects of value of the overall business. However, they are designed to improve liquidity by making them more affordable to a wider group of potential investors. The stock is up 0.9% before the bell today at $376.64.

Occidental Petroleum shares are up 4% this morning after Warren Buffet’s Berkshire Hathaway revealed it has once again increased its stake in the oil and gas firm by purchasing another 794,389 shares to give it a 16.4% stake, boosting its position as the largest individual shareholder. It now has around 153.5 million shares in the company worth some $9 billion based on yesterday’s closing price.

Disney shares are up 2.2% before markets open on news that the Disneyland theme park in Shanghai will reopen on Thursday as the country reopens following fresh Covid-19 lockdowns this year. The park has been closed since March 21, and visitors will still need to show a negative Covid-19 test upon entering.

Uber is up 0.7% this morning after striking a deal with one of Australia’s main transport unions to support a federal body that will enforce minimum pay for its drivers and be responsible for settling disputes between gig economy workers and the company.

 

Broker rating changes

Online marketplace eBay has been downgraded to Neutral form Buy by UBS and had its price target cut to $48 from $60. The stock is down 2.4% thing at $43.32.

Farfetch has been downgraded to Neutral from Buy by UBS and had its price target cut to $10 from $13. The luxury fashion retail platform is down 2.3% at $8.68 before the bell.

State Street has been downgraded to Hold from Buy by Deutsche Bank and had its price target lowered to $67 from $80. The company is down 0.6% today at $64.84.

Boston Beer Co has been downgraded to Sell from Neutral by Goldman Sachs and had its price target slashed to $318 from $380. The alcohol company is trading flat this morning at $334.

Notably, that downgrade came as rival Molson Coors Beverage was upgraded to Neutral from Sell by Goldman Sachs and had its price target raised to $54 from $46.  The stock is up 1.3% before the bell at $56.10.

Fortinet has been upgraded to Outperform from Market Perform by BMO Capital and had its price target raised to $350 from $325. The cybersecurity firm is up 2.9% before markets open today at $60.55.

Microchip Technology has been upgraded to Buy from Hold by Stifel and had its price target bumped-up to $75 from $70. The circuit maker is up 3% today at $62.50.

Ovintiv has been upgraded to Overweight from Neutral by JPMorgan and had its price target increased to $64 from $56. The oil stock is up 4.9% before markets open at $49.59.

Riot Blockchain has been upgraded to Buy from Neutral by Compass Point and had its price target slashed to $14 from $30. The bitcoin mining company is up 5.1% in premarket trade at $5.14.

Snowflake has been upgraded to Buy from Hold by Jefferies and had its price target hiked to $200 from $125. The stock is up 3.4% before the bell at $153.25.

 

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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.

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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