Amidst the chaos of the COVID-19 pandemic, meme stocks emerged as the darlings of retail investors. These stocks, fueled by the whims of social media platforms like Reddit (RDDT), saw meteoric rises in share prices, driven largely by speculative fervor rather than solid company fundamentals.
Take, for example, AMC Entertainment (AMC), whose stock skyrocketed by over 2,500% in the first half of 2021, only to plummet to $3 post a 1-for-10 reverse split last fall.
In this precarious landscape, here are three meme stocks that investors should steer clear of in April.
1. GameStop Stock
GameStop (GME), the original darling of meme stocks, has tumbled by 34% in 2024 following lackluster quarterly results. Revenue for fiscal 2024 amounted to $1.79 billion, with earnings per share at $0.22 – falling short of analysts’ projections of $2.05 billion in revenue and earnings of $0.30 per share.
The decline in hardware and accessories sales by 12% year-over-year, coupled with a staggering 31% drop in software sales, paints a bleak picture for GameStop. As the shift to digital game downloads accelerates and physical console game sales dwindle, the retailer faces significant challenges ahead.
With no guidance for fiscal 2025 and a solitary analyst covering the stock rating it as a “strong sell,” GameStop’s future appears murky at best.
2. Reddit Stock
Reddit (RDDT) made headlines as the first social media company to go public since Pinterest (PINS) in 2019. Despite an initial surge of almost 100% post-IPO, Reddit’s stock has since dropped by 15% from its all-time highs, with a market cap of $7.5 billion.
While Reddit’s revenue grew from $666.7 million in 2022 to $804 million in 2023, the company still grapples with profitability, reporting a net loss of $90.8 million in 2023. With a user base of 73 million daily active users and revenue per user at $5.51, Reddit presents a tempting investment opportunity – but prudence dictates waiting for sustained profitability.
3. Trump Media
Enter Trump Media (DJT), the latest meme stock sensation from the social media realm. Following its SPAC merger, Trump Media shot up by 59% on its debut before settling for a 16% gain.
However, the numbers paint a less glamorous picture. Trump Media’s flagship platform, Truth Social, boasts a modest 5 million visitors in February, a far cry from Reddit’s 2 billion or Facebook’s 15 billion visitors. With a market cap of $1.8 billion, Trump Media reported revenues of $4.1 million and staggering losses of $58.2 million in 2023, largely stemming from interest expenses.
Trading at a jaw-dropping 500x trailing sales, Trump Media stock presents itself as a cautionary tale, beckoning investors to exercise prudence above all.
The author, Aditya Raghunath, has no positions in any securities mentioned in this article. The information provided serves solely for informational purposes. Refer to the Barchart Disclosure Policy for further details.
The views expressed are those of the author and do not necessarily align with Nasdaq, Inc.’s opinions.
