Are These Reddit Stocks Here To Stay?
Investing geniuses or degenerate gamblers? Call them whatever you want, but the Reddit community has definitely made headlines earlier this year when they went up against hedge funds in the GameStop Saga. The stock market rebound on Tuesday may have surprised some investors. However, more surprising for some, though, was that Reddit stocks continued to march higher. Just when you thought that things have finally settled down, r/WallStreetBets are back in action.
According to Arturo Bris, professor of finance at Geneva’s International Institute of Management – “The GameStop story has created ripples where individual investors realize that they had the same power as corporate hedge funds.” This empowers them to work in masses, shaking the foundation of financial markets. Not only this redistributes investing power, but it actually reorganizes the stock market.
No longer dominated just by institutional investors, a lower barrier of entry has allowed more individuals to invest in the stock market today. This could be a turning tide for the stock market as tech-savvy investors and the voices of social media gain more influence. With that in mind, are these Reddit favorites worth keeping an eye out for?
Top Reddit Stocks To Watch Right Now
- GameStop Corporation (NYSE: GME)
- AMC Entertainment Holdings Inc. (NYSE: AMC)
- BlackBerry Ltd. (NYSE: BB)
- Koss Corporation (NASDAQ: KOSS)
GameStop Corporation (GME)
Stocks of video games retail company GameStop Corporation surged up to $246.90 on Tuesday, rising by nearly 27%. The company is seeing these surges after announcing that it has formed a new committee that would assist in finding ways to accelerate GameStop’s transformation. More importantly, this committee will be chaired by Ryan Cohen, manager of RC Ventures LLC and co-founder of Chewy (NYSE: CHWY).
The new committee is also committed to turn GameStop from a brick-and-mortar company into an e-commerce platform, challenging digital competitors such as Steam and Epic Game Store. According to their statement, the committee will evaluate GameStop’s current operational goals, capital structure, and priority points. Digital capabilities and human resources will also be in focus.
While most investors capitalized on the recent short squeeze applied on GameStop, there are individuals who genuinely believed that there is room for the company to grow. With Cohen’s appointment as head of the committee, they believe that he will replicate Chewy’s success in GameStop. Does this mean that GME stock will continue to soar? The question remains so.
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AMC Entertainment Holdings Inc. (AMC)
Though AMC took a huge hit at the peak of the pandemic last year, it has garnered the attention of Reddit stock investors as part of a “meme” stock. As a result, AMC Entertainment’s stock soared, jumping 13% to close at $10.50 on Tuesday. That said, AMC is supposed to release its Q4 earnings today. And that may affect the stock value tremendously depending on the company’s performance.
Moreover, Wedbush’s Analyst Michael Patcher suggested a more cautious approach when looking at AMC Entertainment’s stocks. “Although AMC has taken the right reopening precautions, to drive more viewership in their physical premises, it may take years before AMC fully recovers from the devastation caused by the pandemic,” he said. With that in mind, Patcher maintained a neutral rating on AMC Entertainment.
That said, AMC Entertainment is in a stronger position now. It successfully raised cash to fund future operations by issuing stocks near the peak of the meme stock hype. Moreover, with direct competitor Cineworld Group shutting down its premises, AMC could be in for an opportunity to increase its market share when everything settles down. With the optimism surrounding the reopening of the economy and coronavirus vaccine deployment, will the show go on for AMC stock?
BlackBerry Ltd. (BB)
Even with Reddit’s influence to drive stock prices of BlackBerry up to a peak of $25.10 back in January, it slowly normalized to $10.45 on Tuesday. There remain many uncertainties for the company. In its last investor presentation, Blackberry revealed that it can only maintain a 90% dollar-based net retention rate by Q3 2021.
In a more conservative view, BlackBerry hopes to reach only 63% of gross profit margin in the same timeline. That’s a far cry from the 74% figure in the same period last year. Compounded with the fact that investors are already paying at least 5 times forward sales, this may cap BlackBerry’s upside. Meaning that in the long run, BlackBerry needs to look into ways to increase its profitability.
On a positive note, BlackBerry has secured a partnership with Desay SV Automotive to develop an immersive cinematic driving experience for Chinese automotive maker Chery’s future automotive models. Such good news drove stock prices to increase by 7% on Tuesday, giving investors some breathing room. Will this be enough for investors to continue to put their faith in BB stock?
KOSS Corporation (KOSS)
A second wind of investment thanks to Reddit’s meme stock hype allowed KOSS stock to climb up by over 10% this week. There wasn’t any eventful news pertaining to the company. But KOSS stock was able to ride on GME’s bull run at least during Tuesday morning. However, things took a turn as the stock closed 5% lower on Tuesday.
In terms of financials, Koss seems to perform pretty well. Revenue rose 18% to $4.9 million compared to the year before. Not only that, the company reported a net income of $509,000. That was a considerable improvement from a loss of $216,000 in the year before. This is due to an increase in online e-commerce sales supporting Koss throughout the pandemic.
If we look at how meme stocks performed earlier this year, such increases in KOSS stock price may not be sustainable in the long run. That’s considering that the company’s sales have not risen by the same extent. Investors should look for updates in the company to see if it will continue to perform throughout 2021. With that in mind, do you still have KOSS stock on your watchlist?