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

  1. Apple
  2. Robinhood
  3. Tesla
  4. GameStop
  5. Advanced Micro Devices
  6. Microsoft
  7. AMC Entertainment
  8. NVIDIA
  9. SoFi
  10. Netflix

 

Apple shares are trading 3.8% higher before the bell today at $165.22 after releasing first quarter earnings late yesterday covering its busiest sales season during the last three months of 2021. Revenue rose 11% to a new quarterly record of $123.9 billion and diluted EPS jumped to $2.10 from $1.68. That was better than the $119.3 billion in revenue and $1.91 in earnings forecast by analysts, helping install confidence that Apple is mitigating the supply chain problems that has weighed on device sales. Still, supply issues cost it another $6 billion in the quarter, level with what was incurred in the previous quarter. Sales of iPhones, tablets, computers and other hardware jumped over 9% year-on-year, faster than the tepid 3.7% growth expected by analysts. Meanwhile, its faster-growing and higher-margin services division also performed better than expected after reporting a 23.8% rise in revenue compared to the 18.5% forecast. However, Apple did warn that revenue growth would be slower in the current quarter.

Trading platform Robinhood is set to hit fresh all-time lows today with the stock down a hefty 14% in premarket trade today at $10 after publishing disappointing earnings late yesterday. The company ended 2021 with 17.3 million monthly active users, up 48% from the year before, but that was some 2.6 million users short of analyst expectations and represented a fall from the 18.9 million users it had at the end of September. Revenue rose 14% in the fourth quarter to $363 million, coming in shy of the $370.9 million expected by Wall Street. Its net loss of $423 million turned from the $13 million profit squeezed out last year. It said revenue should come in around $340 million in the current quarter, which will be down as much as 35% as it comes up against tough comparatives driven by the retail trading frenzy last year. It said it was focused on serving first-time investors and helping turn them into long-term ones and said it plans to open up its cryptocurrency platform to customers internationally this year. Piper Sandler slashed its target price on the stock this morning to $13 from $17.

Tesla shares are trading 0.5% higher before the bell after hitting a 14-week low yesterday. There was news this morning that Cathie Wood’s Ark Investment Management has bought 33,482 shares in the company as it believes the selloff since the start of 2022 has been overdone. That purchase would be worth some $28 million based on its last closing price. The stock took a severe hit after record sales and earnings, as well as it plans to grow deliveries by 50% in 2022, were overshadowed by warnings that it will continue to be hit by supply constraints throughout this year and its decision to delay the Cybertruck and other models into 2023.

Microsoft shares are trading broadly flat in premarket trade today at $300.11. Citigroup raised its price target on the stock to $386 from $376 yesterday. The company beat expectations this week when it posted a 20% rise in revenue and a 22% rise in earnings in the last three months of 2021, accompanied by a rosier outlook for its hardware and cloud divisions compared to what analysts had expected and guidance that margins will improve this year. However, that, nor its recently-announced acquisition of Activision Blizzard, have provided a catalyst for the share price, which has come under pressure alongside the rest of Big Tech since the start of 2022. Meanwhile, Norway’s sovereign wealth fund said its investment in Microsoft delivered the greatest absolute return in 2021, followed by Alphabet and Apple.

Has the selloff of Netflix shares been overdone? The stock remains over 20% below where it sat before its latest set of disappointing results last week, but some have seen this as an opportunity. Billionaire investor Bill Ackman revealed yesterday that his hedge fund Pershing Square Capital Management started snapping up shares in the streaming giant last Friday to capitalise on the collapse in the stock following the disappointing outlook, when it revealed added 8.3 million subscribers in the final quarter of 2021, just below forecasts, and warned it only expects to add 2.5 million in the first three months of 2022 – way below the 6.4 million pencilled in by analysts. The fund is now a top-20 shareholder in Netflix with over 3.1 million shares and Ackman said he believes Netflix will benefit from recurring revenues and its ‘best in class management team’. Netflix shares are proving volatile in premarket trade today but are currently down 0.6% at $384.50.

Semiconductor stocks remain popular among retail traders as the ongoing chip shortage continues. AMD, which said yesterday that it expects to close its merger with Xilinx before the end of the first quarter of 2022, is trading 0.2% lower before the bell. Meanwhile, news from Bloomberg this week suggested NVIDIA is set to abandon its mega $40 billion takeover of ARM, which has faced heightened regulatory pressure, allowing its current owner Softbank to spin-off the UK business through an IPO. NVIDIA shares are up 0.3% in premarket trade.

Speculative assets continue to come under pressure, with GameStop shares trading 2.2% higher before the bell today as it looks to rebound from recent lows, and AMC is also hoping to recover from this week’s lows by trading 0.6% higher. The Wall Street Journal reported earlier this week that AMC is in talks to refinance its debt.

Fintech firm SoFi, which was recently given approval to become a national bank, has re-entered the top 10 overnight and is trading 2.4% higher before the bell today after plunging almost 10% yesterday to close at a fresh all-time low of $11.36.

 

How to trade Reddit stocks

You can trade many of the hot stocks being discussed on Reddit with City Index.

Follow these easy steps to start trading Reddit stocks today.

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

 

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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