What is a meme stock?

A meme stock refers to the shares of a company that have gained a cult-like following online and through social media platforms. It also an equity that experiences a sudden surge in popularity after retail interest in it burgeons overnight, owing to related memes that go viral on social media and discussion platforms such as Reddit.

Meme stocks became a phenomenon in early 2021, after US brick and mortar video game seller GameStops share price skyrocketed on the back of a short squeeze orchestrated by users of the Reddit sub-forum, r/wallstreetbets.

Benefits and risks of trading meme stocks

• Due to the general lack of fundamentals involved, meme stocks tend to be extremely volatile and speculative

• However, this also presents huge trading opportunities for retail investors

Best meme stocks: top trending shares on Reddit

Bed Bath & Beyond (NASDAQ: BBBY)

The home and lifestyle companys stock first started to experience a surge in mid-August 2022, after users on r/wallstreetbets started discussing the stock more frequently.

Being one of the most heavily shorted Wall Street stocks, its share price kept climbing until it hit $25 a share on 17 August, double of what it was trading at just a week prior.

The stock crashed by 18% on 6 September, after the sudden death of its Chief Financial Officer (CFO), Gustavo Arnal.

2. GameStop (NYSE: GME)

GME is still one of the most talked-about meme stocks today, as investors continue to favour short selling it. Shares are down over 40% in the last one month.

The mother of the meme stock frenzy had an eight-day losing streak at the end of August, matching the one in January this year.

GameStop saw sales drop from $1.18 billion in the second quarter (Q2) of 2021 to $1.14 billion during the same period this year.

3. Tesla (NASDAQ: TSLA)

The electric vehicle (EV) makers stock has been struggling to find upward momentum since it posted its results for Q2 2022 in late July.

Still, the stock is up 12% in the last three months, compared to the S&P 500s decline of 5%.

Goldman Sachs analysts wrote that Tesla‘s leadership position in EVs, and focus on clean transportation, places it in a great position to capitalise on its long-term shift to EVs. They reiterated a ’buy call and price target of $333.33.

4. Nvidia (NASDAQ: NVDA)

The semiconductor companys stock price has fallen by a quarter since its latest results fell below industry expectations.

CFO Colette Kress explained that ‘macroeconomic headwinds’ and ‘challenging market condition’ led to a ‘sudden slowdown in consumer demand’ for the companys gaming products.

Then on 1 September, US officials told Nvidia to halt the exportation of artificial intelligence chips to China. Investors received this announcement negatively, as shares fell 7% following the news.

Several equity research teams, including Piper Sandler, have lowered their NVDA price targets and ratings.

5. AMC (NYSE: AMC)

The cinema operators main listing on the New York Stock Exchange (NYSE) has plunged nearly 70% since primary rival Cineworld said it would file for bankruptcy in the US on 16 August.

AMC shares also fell after the launch of a new class of ‘preferred shares’ under the ticket ‘APE’. The shares are intended as dividends and will have the same voting rights as the companys common stock. They could also be used for raising capital in the future.

6. Ready Capital (NYSE: RC)

Ready Capital (RC), founded in 2011, is a New York-based real estate finance company that deals with loans for small to medium real estate-related firms.

Analysts at financial news site TheStreet recently upgraded their RC stock rating from ‘c’ to ‘b-’, while JMP Securities lowered its price target from $18 to $16 with a rating of ‘outperform’.

RC shares are down by 6.5% in the last one month. Company CFO Andrew Ahlborn recently sold $62,000 worth of shares at $13.80 a share, the largest share sale in the last 12 months.

7. Apple (NASDAQ: AAPL)

Despite its $2.5 trillion market cap, the electronics giant continues to trade like a meme stock.

Apple shares rose 26% between July and mid-August, but have fallen 12% since then. The stock is also down 14% in 2022.

This volatility looks set to continue, with the launch of the new iPhone 14.

A majority of brokers have ‘buy’ calls alongside a consensus price target of $182.23 on Apple shares. This equates to a 16.8% upside potential from the stocks last traded price of $156.

8. FuboTV (NYSE: FUBO)

The live sports streaming service surged over 40% in August, spiking up over 150% at one point.

The rally had started with the companys improved results for its second quarter, including a 70% year-on-year (YoY) increase in sales. Total subscribers also rose 57% YoY to 1.57 million accounts.

FuboTV then signed a first look content development deal with Ryan Reynolds production company.

Looking ahead, fuboTV bosses expect sales to increase by a compound average of 20% per annum until 2025.

9. GigaCloud Technology (NASDAQ: GCT)

The Chinese business-to-business e-commerce platform began trading in the US on 18 August under the ticker ‘GCT’ at a launch price of $19.20.

The stock jumped up as much as 200% on the first two days of trading to a high of $48. GCT shares have stabilised since around a price of $20 a share.

Chinese e-commerce titan JD.com owns a 12% stake in GigaCloud.

10. Advanced Micro Devices (NASDAQ: AMD)

The personal computer (PC) chip makers shares are down by 20% in the last one month. Shares are down nearly 50% on a year-to-date basis.

The lower price has prompted some brokers to call the stock a ‘buy’, including investment firm Stifel Nicolaus. The firm initiated coverage on the stock on 7 September with a ‘buy’ rating and price target of $122.

The price target equates to a 53% upside potential from AMDs last traded price of $80.