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8 booming meme stocks to watch

Since the start of 2021, meme stocks have proven to be a popular topic of debate and controversy, especially within the US stock markets. Read on to discover how these types of stocks can be both advantageous and disadvantageous for traders. We explore some of the most trending meme stocks with fluctuating share prices to watch in 2023.

What is the meaning of a meme stock?

These are the shares of companies that have seen a recent surge in viral activity, which is usually fuelled by online social media platforms such as Reddit and Twitter. The buzz over a particular stock prompts retail traders to buy the stock with the knowledge that its share price will likely rise. Stocks with high short interest (the most shorted stocks​) are frequently favoured by the community in an effort to squeeze anyone who has been shorting the stock​​ into covering their short.

The term ‘meme stocks’ originated from the online discussion forum Reddit, where the sub-reddit known as ‘WallStreetBets’ has become wildly popular among stock and options traders and has recently had a major effect on US and UK-based exchanges.

How do meme stocks work?

Towards the end of January 2021, WallStreetBets​ users criticised large financial organisations and hedge funds for continually shorting struggling stocks such as GameStop and AMC Entertainment. This led to retail traders purchasing a large number of shares in these companies in order to take advantage of a buy-and-hold approach. The news of a short squeeze then spread virally, attracting a lot of investor attention.

The following cycle explains how Reddit stocks tend to work in the share market, according to a user of the WallStreetBets forum.

  1. Early adopter phase: a company is identified to be undervalued by a number of retail investors, so they start to place buy orders.
  2. Middle phase: the stock starts to gain attention from other traders, who join in the process. Its share price elevates even further.
  3. Late/FOMO phase: the stock gains viral attention across social media and other online platforms. Investors that are late to the process all purchase shares at once with the fear of missing out on potential profits. This is where short sellers join in also.
  4. Profit taking phase: buying peaks and some of the first traders involved start to close out positions. This creates a new panic selling phase as investors do not want to lose money when the share price starts to fall.
  5. Set for next cycle: after crashing, the stock may trade sideways and see little activity for a few weeks or months until buyers regain interest.

Whereas retail traders could most likely profit from rising share prices, on the other hand, institutional investors or hedge funds may suffer if they have been short selling units of the affected stock. If a hedge fund is betting that the price of a certain stock will decrease but all of a sudden its share price starts to rise, this will leave them no choice but to cover their short position by buying the stock to avoid loss. This mad scramble of investors all fighting to buy the stock causes what is referred to as a short squeeze​, which can be a costly process for shorts.

Sometimes, meme companies tap the market for more funding by issuing new shares, taking advantage of the frenzied interest in their company to bolster their balance sheets for the future. They may also do this to increase investment in strategic goals such as marketing and consumer appeal. However, this extra supply of shares hasn’t deterred the investment community much during this Reddit stock boom, and investors still appear confident in their buy-and-hold approach.

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List of meme stocks to watch

GameStop (GME)

The most famous example of a recent meme stock controversy involves the US video gaming and consumer electronics retailer, GameStop. The company’s financials pre-2021 suggested that it was struggling, and its share price had been in a long-term decline. At the start of 2021, GameStop was trading for around $19 per share.

By the morning of 28 January, the stock hit an all-time high of $483, which amounted to great losses for the hedge funds who were caught short, causing various brokers to restrict trading GameStop and other associated shares until the period of volatility was over. Even then, its share price plummeted after a week to $40, then peaked once again a month later. Between 2021 and 2022, GameStop’s share price jumped from $19 to $107, an increase of over 463%, and the volatility surrounding the company is still present, so if you’re looking for a volatile stock, then this may be the one.

AMC Entertainment (AMC)

Another struggling company that has seen its share price soar is US-based movie theatre chain AMC Entertainment. Before 2021, AMC Entertainment was considered to be a penny stock, trading at around $4 per share. Following the GameStop frenzy at the start of 2021, traders also turned their attention to other companies that had a high level of short interest, leading AMC’s share price to reach a high of $36 at the end of March.

Throughout May 2021, the company’s share price jumped by 570% to reach a peak closing price of $63.97. It is often at the top of the WallStreetBets mention list as one of the most trending stocks of 2021, up 823% year to date.

BlackBerry (BB)

As short interest hit a four-year high, another struggling company on this list is BlackBerry Ltd, a Canadian company that specialises in enterprise and security software services. It is also the parent company of mobile phone manufacturing brand BlackBerry. The company was trading for around $9 before the meme stocks boom, where its share price more than tripled to a 52-week high of $28.77.

Shares of BlackBerry climbed sharply, by almost 55% throughout May 2021. In the same month, the company announced a five-year partnership with the University of Waterloo to drive research and development and innovation in Canada, suggesting exciting new projects from BlackBerry in the coming years.

Bed Bath & Beyond (BBBY)

Bed Bath & Beyond stock had been fluctuating for quite some time before the mania started, and the company was forced to close over 20% of its stores across the US in 2020. The home furnishings retailer is up about 60% as of June 2021 when compared with the previous month.

Although Bed Bath & Beyond is proving to be a trending Reddit stock with a rising share price, CEO Mark Tritton does not believe that stock market activity will have an effect on the company’s operations. He also hasn’t emphasised a preference for long-term investors or short-term retail traders, so this could be a stock to watch for both types of traders.

Nokia (NOK)

Nokia supposedly became a targeted meme stock by WallStreetBets due to its involvement in 5G technology. The COVID-19 pandemic has slowed down the rollout of 5G globally, leading to a large number of hedge funds and institutional traders to short Nokia stock. In January 2021, there was a surge of bullish sentiment for the stock and a short squeeze occurred over a single day. As a result, Nokia’s share price jumped by 106%. Although it fell back to its original price in the following days, it made gains of more than 38% throughout 2021 overall.

Out of these five listed  stocks, 5G company​ Nokia has the current largest market capitalisation and global presence, operating in over 130 countries worldwide. Therefore, some investors may see Nokia not simply as a meme stock but as a company with long-term investment potential, dividing investor sentiment​.

Tesla (TSLA)

Towards the end of 2021, the electric vehicle (EV) maker was one of the most discussed stocks on WallStreetBets due to several reasons. The company reported Q3 earnings which were greater than anticipated for the third consecutive quarter, helping to drive investor sentiment. Its market capitalisation soared to over $1tn, making Tesla part of the prestigious “trillion-dollar club​” and causing its share price to rise over 35% in less than two weeks.

In November 2021, Hertz Global Holdings announced that it would be partnering with Tesla to electrify its fleet, ordering more than 100,000 Model 3s to be delivered by the end of 2022. Although this helped to drive initial bullish sentiment towards the EV stock​, it quickly turned bearish when CEO Elon Musk emphasised that no contract had been signed yet, and Tesla has “far more demand than production”.

Advanced Micro Devices (AMD)

Despite AMD’s strong company fundamentals, balance sheet, and revenue growth throughout 2021, it became the sixth most talked about stock on Reddit in December 2021, even more so than GME and AMC, making it a likely target.

According to TheStreet, short interest around the chipmaker’s stock spiked from around 62 million shares at the end of Q3 2021 to 75 million in Q4 2021. AMD’s share price was up by around 50% at the end of 2021, with six-month gains of nearly 107%.

Bakkt Holdings (BKKT)

Bakkt Holdings, which operates a digital asset and crypto trading platform, debuted on the stock market in October 2021 after merging with a special-purpose acquisition company​ (SPAC). It then announced partnership deals with both Mastercard and Fiserv, helping to expand its number of customers and clients.

These partnerships caused Bakkt’s share price to jump from around $10 to over $50 within the space of a few weeks, although insider selling activity caused it to drop back to below $10 again not long after. At the end of December 2021, it announced a third partnership with Manasquan Bank, causing a fresh new wave of investor interest, so this could be a stock to watch in the upcoming months.

How to find meme stocks

Follow the steps below to learn how to get started finding and trading on these types of stocks. Open an account to spread bet or trade CFDs.

  1. Find shares that are experiencing frequent price moves. You can utilise our platform features for this, such as our ‘risers and fallers’ section, which highlights stocks with the largest changes in price action for that day.
  2. Analyse the markets and make use of social media. Twitter and Reddit in particular are a good way to stay up to date with news and trending themes.
  3. If you want to take a short position, you could place a ‘sell’ bet. Please note that shorting restrictions may apply to individual shares on our platform.
  4. Polish your strategy. Learn how to trade on volatility, which can be a risky and unpredictable process.
  5. Use risk-management tools. Stop-loss orders can be effective at controlling your losses by closing you out of a trade when the trade goes against you, although they may also be triggered by short-term price movements, closing you out a potentially profitable trade if the price were to change again.
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What risks do they bring to traders?

  • The share price of a company usually reflects its intrinsic value and overall financial status. Therefore, if a company’s share price soars overnight, it is usually a sign of a highly volatile market that could see the company’s share price violently spike in either direction. It’s advised to use prudent risk-management when trading in these types of environments.

  • US Investors such as Dan Niles and Paul Nolte are predicting that US meme stocks will crash after announcements from the Federal Reserve in the second half of 2021, as it may decide to ease up on its monetary policies. This could lead to less liquidity within the stock market and less opportunities for short selling.

Read our complete guide to risk-management​ to find out how to offset risk in volatile markets.

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How can I find new meme stocks?

Reddit forum WallStreetBets has several trackers that calculate the number of mentions a particular stock has on the platform and if it has potential to be part of the trend. An example is YoloStocks, which scours for stock ticker mentions on subreddits, so you can keep up to date.

What are some other examples of meme stocks?

Other examples of potential meme stocks whose share prices have risen over the past year include Sundial Growers, Clean Energy Fuels Corp, Palantir Technologies, Tesla and Clover Health Investments. You can spread bet or trade CFDs on these stocks on our online platform, so open a trading account to get started.

Are meme stocks a good trade?

Meme stocks can be effective for traders who prefer to speculate on more volatile markets. However, they can also bring many risks, so consult our guide on trading risk-management protocols before opening a position.

Can I short meme stocks?

It is possible to short meme stocks, provided there is enough liquidity in the market. Some shares on our platform may come with shorting restrictions, so make sure to browse our instruments pages for more details beforehand.

Do meme stocks pay a dividend?

This depends on the company’s financials and if it can afford to pay shareholders a dividend. Retail traders tend to turn struggling companies into meme stocks, so it is less likely that they would have strong enough financials. Read about how to find stocks with the highest dividends in the market.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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