Can Stocks Continue After a Good Earnings Call Reddit
It may not last forever. But, the Reddit stocks phenomenon is here to stay for now. It may go against the philosophy of investing legends like Warren Buffett. But, as retail investors continue to essentially gamble on stocks, with minimal interest or concern about their underlying fundamentals, there are likely still fast profits to be made with this high-risk, but possibly high-reward "investing" strategy.
Interest in continued favorites like AMC Entertainment (NYSE: AMC ) may be peaking. In the case of GameStop (NYSE: GME ), it may have already peaked. But, as recent headlines indicate, the hunt is on for new names that could provide similar amounts of fast trading profits.
Obviously, it's not wise to risk money you can't afford to lose. That is, don't risk permanently damaging your financial future just because a stock seemed primed for a short-squeeze. Or, because it's trending on r/WallStreetBets. Yet, you don't have to necessarily "bet the ranch" to profit from this sometimes logic-defying investing phenomenon.
Instead, there are several stocks you could throw $100 into, with the potential to see a high return on your small investment. Nothing's guaranteed, of course, but these seven risky Reddit stocks could potentially see a turbocharged rally or two in their future:
- Ashford Hospitality Trust (NYSE: AHT )
- Brooklyn Immunotherapeutics (NYSEAMERICAN: BTX )
- GEO Group (NYSE: GEO )
- PubMatic (NASDAQ: PUBM )
- Skillz (NYSE: SKLZ )
- Sundial Growers (NASDAQ: SNDL )
- ContextLogic (NASDAQ: WISH )
Reddit Stocks: Ashford Hospitality Trust (AHT)
Source: Shutterstock
AHT stock was a hotel REIT (real estate investment trust), hit hard by last year's Covid-19 shutdowns. It avoided having to file for Chapter 11 bankruptcy. But it would've had to if it had failed to negotiate forbearance from its lenders. Yet, in the past month, Reddit traders have piled back in, sending it up 69%, to around $5.42 per share.
This retail investor enthusiasm has also improved the company's financial footing. Much like AMC, it was able to seize the opportunity, and raise new equity capital, thanks to the run-up. So, with its financials improving, and the travel reopening trade in full-swing, does this stock have even more room to run?
Considering it traded for around $27 per share before the outbreak, a partial recovery for Ashford Hospitality shares could still mean a triple-digit percentage return on your investment. However, it's anything but a sure thing. Per a Seeking Alpha commentator's recent bearish take on the stock, the REIT not only still has a high debt load. When you factor in its outstanding preferred stock, the increase in its underlying value from improved results may not flow to common shareholders.
In other words, there's a good reason why AHT stock still trades for a fraction of its pre-Covid-19 prices. Even so, this may not matter to Reddit investors, who may send it soaring even higher before they decide to look elsewhere.
Brooklyn Immunotherapeutics (BTX)
Source: Shutterstock
Formerly known as NTN Buzztime, shares in Brooklyn Immunotherapeutics took off once it merged with the privately held biotech company of the same name. Becoming one of the hottest meme stocks out there, it soared from $5.40 at the time of the deal close (March 25), to as much as $80.67 per share. Yet, as the bubble that formed within it faded, shares have since given up most of their gains, and trade for around $15 per share today.
So, with the meme stock hype seemingly played out, why might this be an appealing opportunity, albeit one that's a gamble? Speculators may have gotten ahead of themselves. But, this clinical-stage company still has tremendous potential with the therapies in its pipeline.
The main therapy in its pipeline? Its IRX-2 cytokine therapy for the treatment of head and neck cancer. According to its May 2021 investor presentation, this therapy is currently in Phase 2b trials. Recently, the company has moved into mRNA-based gene-editing and cell therapies as well. This portion of its timeline may be more years in the making. Yet, progress in this area could also produce a short-term boost for the stock.
Admittedly, a repeat of the run-up in BTX stock is going to hinge on the Reddit stock community piling back into it. But, given the strong potential of its underlying business, shares could still take "to the moon" again, even without the boost of the meme stock phenomenon.
GEO Group (GEO)
Source: rawf8/Shutterstock
With all the talk about criminal justice reform, and President Joe Biden's Executive Order banning new federal private prison contracts, it's been a tough time this year for publicly traded owners and operators of correctional facilities. When Biden's EO was signed into law, I made the case why it may not be such a big deal for the industry.
Between their contracts with U.S. states, as well as their contracts with other agencies unaffected by the order (like Immigration detention facilities), I argued that the downside from losing Bureau of Prisons contacts was more than priced-in with both GEO stock, as well as its peer, CoreCivic (NYSE: CXW ).
Yet, for the first few months, it appeared those more bearish were correct. Geo Group got hammered, mainly due to it suspending its dividend to conserve cash. But, starting this month, it seems like Reddit has made it one of its next short-squeeze targets. This resulted in shares popping from around $5.25 per share to nearly $9 per share before partially pulling back in recent days.
However, this may not be the end of the GEO stock bounce back. With about 35.7% of its float sold short, another parabolic move may be in store. Consider this another short-squeeze play worth throwing $100 into.
Reddit Stocks: PubMatic (PUBM)
Source: Tada Images / Shutterstock.com
Looking for short-squeeze stocks? PUBM stock may be one to keep an eye on. Shares in the programmatic advertising company have fallen substantially over the past few months. It's fallen more than 56% off its highs, from $76.96 per share, to around $33.60 per share today.
The reason? As a Motley Fool commentator recently discussed, shares got way ahead of themselves earlier this year. With its big declines, PubMatic is now back to a valuation more in line with its long-term prospects. But, related to this beat-down based on valuation has been the fact that it's become a crowded trade among the short-seller community.
As a result, more than 55% of its outstanding float has been sold short. The possible outcome from this? Just like what happened earlier this year with AMC and GameStop, high short interest, coupled with en masse buying by retail speculators, could result in a jaw-dropping short-squeeze.
We may not see a squeeze on the level of AMC or GME stock. But, a temporary parabolic move, like the one seen in Clover Health (NASDAQ: CLOV ) earlier this month (which went from $9 to as much as $28.85 per share in a matter of days), may be possible. With this, throwing $100 at this may be a fun and (possibly) profitable short-term trade.
Skillz (SKLZ)
Source: Shutterstock
Back in February, when anything Cathie Wood's Ark Invest was involved in running hot, mobile e-sports play SKLZ stock was flying high. The former SPAC (special purpose acquisition company) more than doubled in price after its merger close. But, in the months that followed, sentiment quickly shifted.
As inflation fears scared off growth stock investors, and short-sellers painted a not-so-pretty picture of the company and its growth potential, Skillz shares took a beating, briefly falling back to price levels not far above its blank-check company offering price.
Yet, since bottoming out in the spring, growth investors have started trickling back in. Reddit investors have been giving it more attention as well. But, don't mistake this resurgence in interest for irrational enthusiasm. InvestorPlace's Luke Lango has made the case why there's substance to its growth story. Namely, as digital advertising fails to be the best way to monetize mobile gaming, this company's competition-based model, which involves entry fees and prizes, appears to be where the industry is heading.
Lango sees shares changing hands for about $20 per share day, heading to $30 per share in the immediate future. But, as it's on the Reddit crowd's radar, and more realize that it's a reasonably priced growth stock? We could see it deliver even more impressive returns in the coming months.
Sundial Growers (SNDL)
Source: Shutterstock
Based on its fundamentals, Sundial Growers doesn't look to be that great of an opportunity. Due to heavy shareholder dilution earlier this year, this pot stock trades at a forward price-to-sales (P/S) multiple on par with high-quality names in this space, such as Canopy Growth (NASDAQ: CGC ).
Why pay up for SNDL stock, when names like CGC stand to benefit more from changing social mores about weed? Due to its low stock price (around $1 per share today), and the popularity of it among retail traders, expect it to see outsized moves on any progress related to the U.S. Federal Government legalizing marijuana.
Yes, President Biden hasn't yet warmed up to the idea of legalization (rather than just decriminalization). Even as his own party has tried to fast-track legalization in Congress. But, don't take this to mean America is still years away from having a fully open market for pot. With this being less of a partisan issue than it was in the past, sweeping changes could happen sooner than you think.
Legalization wouldn't immediately change Sundial's underlying business. Yet, it could be enough to send its shares back up toward prior highs (as much as $3.96 per share). Now, don't get me wrong, this stock is still richly priced and could fall substantially if pot legalization hits a near-term dead end. But, comparing possible gains against possible losses, it's at least worth a $100 "legalization lottery ticket" wager.
Reddit Stocks: ContextLogic (WISH)
Source: sdx15 / Shutterstock.com
It's not a secret that many are looking to this as being the next hot meme stock. Shares in ContextLogic, owners of the Wish.com e-commerce platform, have fallen substantially off their highs. But, after falling more than 75% so far this month, it's caught the eye of Reddit investors, who have bid it back up from under $8 per share, to around $11 per share as of this writing.
Can this rebound continue? Granted, there's much on the table pointing to its meme stock rally sputtering out. Short interest in this stock is moderately high (15.75% of float). But, it's well below the level seen in the most successful short-squeeze plays.
Meme stock traders may not be too concerned about fundamentals. But, recent guidance has been underwhelming. During the pandemic, it's sales may have seen a nice boost, thanks to the outbreak's tailwinds for e-commerce. Yet, as the world goes into "recovery mode," year-over-year sales growth is set to slow down considerably.
Yet, if Reddit speculators pile in, and other investors cut the company some slack, as Deutsche Bank analyst Kunal Madhukar did with his recent bullish call on shares, WISH stock may have room to continue on its recovery.
FREE REPORT: 17 Reddit Penny Stocks to Buy Now
Thomas Yeung is an expert when it comes to finding fast-paced growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8,000%, Ripple before it flew up more than 480% and Cardano before it soared 460%. Now, in a new report, he's naming 17 of his favorite Reddit penny stocks. Claim your FREE COPY here!
On the date of publication, Thomas Niel held long positions in CXW and GEO stock. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com , has been writing single-stock analysis for web-based publications since 2016.
Source: https://investorplace.com/2021/06/7-best-reddit-stocks-to-buy-100-to-spare/