Reddit stocks: what meme stocks are trending?
Joshua Warner October 15, 2021 10:29 PM
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 October 15, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.
- Corsair Gaming
- Virgin Galactic
- Upstart Holdings
- Clover Health
Corsair Gaming has entered the top 10 overnight and rocketed straight to the top of the table of most-discussed stocks. The company said yesterday that third quarter revenue came in around $391 million, which would mark a significant fall from the $529.4 million delivered in the second and well below the $484.1 million forecast by analysts. It also said it expects to book $1.825 billion to $1.925 billion over the full year, which also disappointed compared to the $2.04 billion expected by analysts. Wedbush cut its price target on the stock to $39 from $45 this morning while Credit Suisse slashed its target to $26 from $31. Corsair Gaming shares trade at just under $27 before the opening bell today.
Virgin Galactic has come back under the spotlight after announcing that its enhancement programme for VMS Eve and VSS Unity will begin around one month later than planned with its commercial service now set to launch in the fourth quarter of 2022. Reports suggested Virgin Galactic shares slid as much as 12% in extended trade yesterday and plunged even further in premarket trade today.
Blackberry shares remain in play after the stock announced a string of new partnerships this week, having teamed-up with Qualcomm and Google to work on new version of an Autopilot Cockpit platform, and working with Okta, Mimecast, Stella Cyber and XM Cyber on improving security for its customers.
Upstart Holdings shares continued to push higher yesterday and have risen over 22.5% since the start of the week to sit at an all-time high of $379.68. The company, which runs an AI-driven lending platform, has gained traction since launching the Upstart Auto Retail software platform that allows dealerships to sell and customers to buy cars and access financing. It said over $1 billion worth of cars had been traded through its platform in the second quarter.
Tesla remains in play ahead of its earnings next week after reporting record deliveries in the third quarter. Wall Street is expecting total revenue of $13.50 billion in the third quarter which, if achieved, would mark a new record and be up from $8.77 billion the year before and from $11.96 billion in the second quarter. Analysts also expect adjusted EPS to hit a new quarterly record by rising to $1.50 from $0.76 the year before. Recent news that Chinese-made cars hit new records in September have further supported the view that Tesla is managing to mitigate the supply chain woes better than its rivals, some of which have had to suspend output in factories because they can’t source the components they need. Jefferies raised its price target to $950 from $850 this morning after raising its delivery expectations over 2022-2023. CEO Elon Musk also tweeted that its full self-driving beta software will start to be rolled-out to those with safety scores of 99/100 next week, after introducing it to those with perfect scores last week. Tesla shares booked their fourth straight-day of gains yesterday to close at their highest level since February.
SmileDirectClub, long touted as a potential short-squeeze candidate, had its price target cut to $6 from $7 by Jefferies yesterday.
Ocugen shares have rallied over 42% since the start of the week and now trade at their highest level since early June. The company has gained ground since news broke earlier this week that its partner Bharat Biotech International had its Covid-19 vaccine given emergency use approval in India to protect kids aged between 2 to 18 years old.
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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 – 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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