The initial trade that started the meme stock phenomena in earnest was on GameStop Corp. (NYSE: GME) earlier this year. While there were many other meme stock trades prior to GameStop, like Beyond Meat and Lemonade, none lit up the sky like GameStop.
Reddit’s WallStreetBets traders found out that incredibly, more than 100% of the GameStop stock float, which is the number of shares that are actually available to trade, were sold short. This was when the stock was trading around the $20 level. What happened next was a parabolic massive move higher.
The WallStreetBets and other chat boards exploded, and so did GameStop stock. WallStreetBets has a stunning 10.2 million readers and counting. As the meme stock army started to buy, not only stock but options as well, those that were short were forced to start buying the stock as well. In a short sale, your loss potential is unlimited, compared with owning a stock where your loss potential is the stock going to zero, but no more. With over 100% of the float short, and many of the short sellers being big money hedge funds, the rout was on.
The buying fed on itself, as not only were short sellers forced to cover, which pushed the shares higher, but options dealers and traders were also forced to buy shares to cover their exploding options exposure. The stock went from $43 on January 21 to a stunning intraday high of $483 just one short week later. Incredibly, by February 2, the shares had fallen all the way back to $90, and by February 19, the stock closed at $40.19. GameStop closed last Friday at $160.09.
The question now is who is next. AMC Entertainment, BlackBerry, DraftKings, FuboTV, Lucid, Nokia and a host of other stocks have been part of a massive increase in retail trading, but we are looking for the next massive winner. We have found five stocks that could fit the bill. It is important to remember that trading the meme stocks is for very aggressive traders with huge risk appetites.
C3.AI
Founded by Wall Street and Silicon Valley legend Tom Siebel, this company was named one of the Financial Times fastest-growing U.S. companies. C3.AI Inc. (NYSE: AI) operates as an enterprise artificial intelligence (AI) software company. It provides software-as-a-service applications for enterprises. Its software solutions include C3 AI Suite, a platform-as-a-service application development and runtime environment that enables customers to design, develop and deploy enterprise AI applications. Its C3 AI Applications include industry-specific and application-specific turnkey AI solutions.
The company’s C3 AI applications include C3 AI Inventory Optimization, a solution to optimize raw material, in-process and finished goods inventory levels. Its C3 AI Supply Network Risk provides visibility into risks of disruption throughout the supply chain operations for enterprise supply chain managers. C3 AI Customer Churn Management enables account executives and relationship managers to monitor customer satisfaction using transactional, behavioral and contextual information, as well as to take action to prevent customer churn with AI-based and human-interpretable predictions and warning. C3 AI Production Schedule Optimization is a solution for scheduling production, and C3 AI Predictive Maintenance provides insight into asset risk to maintenance planners and equipment operators. it also offers C3 AI Fraud Detection solution and C3 AI Energy Management solution.
The stock has been pounded from highs made last year and has almost 14% of the float sold short. Needham has a Buy rating and a Wall Street high $146 price target. The much lower consensus target is $97.40, and C3.AI stock closed on Friday at $49.38 a share.
KnowBe4
This off-the-radar stock saw some huge volume last week due to a well-received and upsized secondary offering. KnowBe4 Inc. (NASDAQ: KNBE) engages in the development of security awareness training and a simulated phishing platform. Its security awareness platform enables organizations to assess, monitor and minimize the ongoing cybersecurity threat of social engineering attacks.
The company’s products include:
- Kevin Mitnick Security Awareness Training, a security awareness training product
- KnowBe4 Enterprise Awareness Training, an integrated platform that simulated random attacks
- KCM GRC Platform, a SaaS-based GRC platform
- PhishER, which analyses suspected attacks that employees report by clicking the Phish Alert Button within their email applications
- KnowBe4 Compliance Manager, which help customers save time and resources by providing an intuitive user interface with streamlined workflows that enables visibility into the ongoing audit and compliance processes at various levels of the business.
It also offers phishing test tools that help organizations assess their vulnerability to various formats of phishing attacks and benchmark their security awareness levels against their peers. The Phish Alert email add-in button allows users to forward email threats to the security team for analysis in one click. Security awareness training tools help IT teams create and deploy security awareness programs. Password tools evaluate password-related risks within organizations, and email security tools assess email-related security threats, including spear phishing, domain spoof or mail server malfunctions. Its malware tools test an organization’s network against ransomware and crypto-mining attacks.
A massive 25% of the 14 million share float is sold short. Needham’s Buy rating comes with a $40 price target. The consensus target is just $25.83, and Friday’s close was at $25.62 per share.
24/7 Wall St.PubMatic
This company had another explosive IPO that blew up out of the gate, traded higher and has come way back in, offering stellar entry points. PubMatic Inc. (NASDAQ: PUBM) provides a cloud infrastructure platform that enables real-time programmatic advertising transactions worldwide. The company’s solutions include PubMatic Cloud, which offers a customizable platform as a service to deliver a proprietary solution; openwrap and openwrap OTT, the Prebid-powered header bidding solution; openwrap SDK, which is an in-app header bidding technology; and media buyer console.
PubMatic also provides RTB advertising technologies, digital advertising inventory and real-time creative scanning for ads. Furthermore, the company offers audience encore for audience data transaction, and cross-platform video for multi-integration support for video bidding. Its platform supports an array of ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top, connected television and media.
Top analysts see PubMatic as an ad-tech winner with multiple drivers, including the shift to programmatic advertising, buyers consolidating spend around fewer supply-side players and growth in new verticals like Connected TV. Some across Wall Street believe 20% or more revenue growth over the next two years is achievable and could be conservative.
The company just posted strong second-quarter results, and the short interest is a stunning 30% of the small 8.5 million share float. Oppenheimer raised its price target on the Outperform-rated stock to $50 from $45. The consensus target for PubMatic stock is $48.86, also well above Friday’s close at $29.66, which was down almost 5% on the day.
Robinhood
This company was the birthplace for much of the meme stock revolution, and the stock already has started to attract big trading volume. Robinhood Markets Inc. (NASDAQ: HOOD) operates a financial services platform in the United States that allows users to invest in stocks, exchange-traded funds (ETFs), options, gold and cryptocurrencies.
It also offers various learning and education solutions:
- Snacks, a digest of business news stories
- Learn, which is a collection of approximately 650 articles, including guides, feature tutorials and a financial dictionary
- Newsfeeds that offer access to free premium news from various sites, such as Barron’s, Reuters and The Wall Street Journal
- Lists, which allow users to create custom watchlists to monitor securities, ETFs and cryptocurrencies, as well as cash management services.
The short interest data was not available due to the recent initial public offering, which traded off the first few days and then exploded higher. Atlantic Equities has a $65 price target and an Overweight rating. A consensus target has not yet been set. Since going public, Robinhood Markets stock has traded between $33.25 and $85.00, and it closed at $50.63 on Friday.
Teladoc
This stock was already somewhat in the meme traders’ sites, as it was a huge COVID-19 winner as the pandemic forced many people to stay home for extended periods. Teladoc Health Inc. (NYSE: TDOC) provides virtual health care services on a business-to-business basis in the United States and internationally.
The company covers various clinical conditions, including noncritical, episodic care, chronic and complicated cases like cancer and congestive heart failure, as well as offers telehealth solutions, chronic condition management, expert medical services, behavioral health solutions, guidance and support, and platform and program services.
It serves health employers, health plans, hospitals, health systems and insurance and financial services companies. The company offers its products and services under the Teladoc, Livongo, Advance Medical, Best Doctors, BetterHelp and HealthiestYou brands.
Almost 12% of the float is sold short. Cowen has an Outperform rating and a $188 price target on Teladoc Health stock. The consensus target is up at $227.14, and shares last closed at $144.00.
Who knows for certain which stock will be the next target of the WallStreetBets crowd. One thing is for sure. The retail army of investors and traders is not going away any time soon. Fortunes were made on GameStop and a host of other names, and that only whets the appetite of newcomers.
It is very important to take note here that the action on these stocks is closer to betting at a casino than investing. This is the kind of speculative trading that could include a massive loss of principal, so it is only for very aggressive investors with a very high risk tolerance level.
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