Reddit stocks: what 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 September 29, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.

  1. Tesla
  2. SmileDirectClub
  3. Palantir
  4. Micron Technology
  5. GameStop
  6. Alibaba
  7. Lucid Group
  8. Advanced Micro Devices
  9. Canoo
  10. AMC Entertainment

Tesla remains the most-discussed stock overnight after reports surfaced over the weekend that this will be the most intense week of deliveries in the company’s history. There has been a flurry of news out over the past week to spur interest in the stock. It is set to release its Full Self Driving beta software next week, and Reuters reported that Tesla’s factory in Shanghai is set to produce 300,000 cars during the first nine months of this year. Yesterday, CEO Elon Musk said Tesla China was ‘doing great’ at the Code Conference, adding that he expected relations with China to improve once face-to-face meetings can start again.

Fellow electric carmaker Lucid Group has also re-entered the top 10 overnight after CEO Peter Rawlinson told Reuters today that it still expects to produce 577 cars before the end of the year and remains on course to produce 20,000 vehicles in 2022 and 50,000 in 2023. The firm has enough funding to see it through until the end of next year but it will not wait until then to secure more cash. It also said that it expects the chip shortage to ease over the next year but that it is taking action to mitigate any disruption. That came as Lucid announced yesterday that the first customer-quality vehicles rolled-off its production line at its facility in Arizona, with deliveries of the Lucid Air Dream Edition set to start in late October. It has over 13,000 reservations on its books. Expectations for the Lucid Air Dream Edition are high after it became the first electric car to boast a range of over 500 miles on a single charge, outdoing the existing leader – Tesla.

Shares in dental firm SmileDirectClub and electric lifestyle firm Canoo, both of which have been touted as the next candidates to undergo a short squeeze, both continued to decline yesterday.

Palantir shares closed 7.8% yesterday, booking its second consecutive days of losses in what could be the start of a reversal after rallying higher since early July. Investors should closely watch movements today to see if the reversal is confirmed or just a temporary blip for the stock.

Micron is a new entry overnight after the memory chip maker released fourth quarter earnings after the closing bell yesterday. Revenue rose to $8.27 billion from $6.06 billion the year before and beat the $8.22 billion forecast by analysts. That was the second highest quarterly revenue performance on record, just behind the stellar performance delivered in the third quarter. GAAP EPS jumped to $2.39 from just $0.87 last year, also coming in ahead of the $2.24 forecast by Wall Street. Micron said it is expecting revenue of around $7.65 billion and EPS of around $2.00 in the first quarter of the new financial year, as it warned that shipments will decline modestly as some customers are tweaking their orders due to a shortage of non-memory chip components amid the wider supply shortage in semiconductor chips. A number of brokers cut their price target on the stock after the earnings, but brokers still see over 46% potential upside from the current share price.

GameStop shares sank 5.7% yesterday to close at their lowest level in over one month.

Fellow meme stock favourite AMC Entertainment followed lower, sinking 5.9% yesterday to also close at its lowest level since August 24. Cinema stocks have come into play lately amid the release of the new James Bond film, which is seen as a key test of appetite amongst cinemagoers to return to theatres.

Alibaba booked its second day of consecutive gains after hitting fresh lows last week. It emerged yesterday that the firm has started allowing users to purchase items on its apps using Tencent’s rival payments service named WeChat Pay as the regulatory crackdown in China starts to deliver drastic change in the market. Alibaba has its own payments platform named Alipay and large tech firms have traditionally shut-out rival services, but that appears to be changing after the Chinese government pushed for firms to stop blocking access to each other’s services. Alibaba confirmed to CNBC that a number of its services and apps, from food delivery to its video streaming service, are supporting Tencent’s payment service. However, its two main shopping apps – Taobao and Tmall – are not thought to be included at present. Separate reports surfaced this morning that China’s cyber regulator is setting up governance rules for algorithms in around three years time, stating they should be developed to uphold the core values of socialism.

AMD shares plunged 6.1% yesterday, marking its biggest one-day fall since September 2020. The stock, in focus amid the problems in the semiconductor market, is trading over 38% higher than when it started to rally higher in mid-May, having hit an all-time high on August 4. Still, brokers believe there is still as much as 16.8% potential upside from the current share price before the opening bell 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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