The Reddit crowd trading during the day turned the first quarter of 2021 into one of the wildest periods of stock mania in modern history. Undoubtedly, the books, in the plural, will be devoted to the subject in the coming years.
But after these little speculators banded together to drive dozens of dark stocks into hundreds or even thousands of percent – and in the process burned some hedge fund moguls betting on falls – the move appears to be fading. An index that tracks 37 of the most popular meme stocks – 37 of the 50 that Robinhood Markets banned clients from trading during the height of the frenzy – is essentially unchanged in the past two months after surging nearly 150% in January. .
Talk to Wall Street veterans and they will tell you that this flat line is the beginning of what will be an inexorable downward movement in these stocks.
It’s not so much about poor business fundamentals. At least not in the short term. Day trading fans have shown an amazing ability to ignore these facts. It is more that as the pandemic slowly subsides and the economy begins to open up, many of them will leave their homes and begin to return to offices and restaurants and take trips near and far. And while they do, they can stop obsessing over their Robinhood accounts.
In other words, your collective influence over the universe of meme stocks will diminish.
“People are going to be doing other things,” said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a “big reckoning” at some point, he said. “There is no question in my mind.”
Of course, the whole of Wall Street, broadly speaking, has misunderstood the Reddit crowd for weeks earlier this quarter, and your analysis may be wrong again now. However, preliminary data suggests that they are correct.
Recent reports suggest that vaccinated Americans are planning a long-awaited vacation with searches for “Google Flights ”reaching a peak popularity score of 100 this week, according to a Google Trends tracker. The opposite is seen in terms like “stock trading “and”invest ”that have plummeted, shows Google Trends.
“The impact of the stimulus control on retail is diminishing,” said Edward Moya, senior market analyst at Oanda. “Many Americans are looking to go big by attending sporting events, traveling across the country, on vacation, visiting family and friends, and renovating their wardrobes before heading out to restaurants, pubs, and heading back to the office.”
Read more: Americans signal that they will spend stimuli on travel, not on GameStop
Juggernaut by Gamestop
Video Game Retailer GameStop Corp. became the model for retailers looking to rage against the hedge fund elite. However, the actions The 2,460% roller coaster along with other favorites promoted on Reddit’s WallStreetBets thread caused both pain and joy.
The more than 900% rise in stocks this year has caught the attention of Wall Street analysts who follow it. The 12-month average price target implies that the stock will lose more than three-quarters of its value from current levels. Only Jefferies maintains a price target near Thursday’s close of $ 191.45, and that decision came with a warning that stocks are “subject to volatility beyond fundamentals.”
But any sense of GameStop trading in fundamentals has been ignored since it first wowed Wall Street and Reddit users in the second half of January. The bulls are more than happy to tout their bets on the forums as a move to beat up short sellers as they buy into the rebirth of a company delivered by activist investor Ryan Cohen.
Read more: GameStop adds another Amazon executive to the team
Dice AMC Entertainment Holdings Inc.’s position as a movie theater attended by many Americans at one point is not a complete surprise as to why Reddit users were quick to turn to the company’s assistant. #SaveAMC was trending on Twitter and amateur investors seemed more than happy to fight off Wall Street skeptics even though most movie theaters were closed due to the ongoing pandemic.
The chain’s latest rally came amid plans to continue reopening cinemas, yet Wall Street is skeptical. None of the nine analysts tracking the company rates it as a buy, and the average price target implies that the stock will lose 63% of its value next year.
Read more: AMC plans to be almost completely reopened on Friday after Covid Hiatus
The retail euphoria seeped into a wider range of securities, from cult favorites like Bitcoin, Tesla Inc., and ARK Innovation ETF to smaller companies like the clothing retailer. Express Inc. Chinese technology company The9 Limited is among the best of the bunch this year with an increase of 860%.
The company’s rally has been fueled by recent moves to ride the Bitcoin wave alongside pairs like Future FinTech Group Inc. and Ault Global Holdings Inc.
Zomedica Corp., a small-cap animal health company, has become a cult favorite among retail investors chasing low-priced stocks. The Ann Arbor, Michigan-based company started the year worth less than a quarter, but it had skyrocketed to $ 2.91.
The company’s trading volume has accelerated this year with an average of 174 million shares changing hands per session, more than four times the average over the course of 2020. A mention of Tiger King’s Carole Baskin helped bring it about. went viral in mid-January.