The allure of these stocks transcends mere enthusiasm and sensation amongst individual investors
Source: Michael Vi / Shutterstock
When considering the prime meme stocks to invest in, the focus should be on stocks that have recently gained favor with individual traders, yet exhibit characteristics that render them compelling based on fundamentals, rather than just hope and buzz.
Among the notable stocks in the r/WallStreetBets community on Reddit, there are a few companies meeting both criteria. Essentially, these may be deemed “growth at a reasonable price.” While not essentially “inexpensive” by conventional valuation metrics like price-to-earnings, they still qualify as sensible investments. These entities are trading at earnings multiples that are arguably reasonable, or even more than reasonable, in relation to projected growth.
Moreover, there are a few entities that fall into the category of value stocks. Thus, irrespective of your investment approach, there are robust prospects to be capitalized on, illustration being the three top meme stocks to buy.
Lyft (LYFT)
Source: OpturaDesign / Shutterstock.com
Lyft (NASDAQ:LYFT) might have committed a substantial error in its initial press release for the most recent quarterly earnings. Nevertheless, there is a solid rationale behind why this rideshare stock did not relinquish all of its post-earnings gains following the correction of this mistake.
The projected adjusted EBITDA margin of 50 basis points might not be as commendable as the initially reported 500 basis point figure. Nevertheless, this still positions Lyft to witness its first year of generating positive free cash flow.
Presuming further successful implementation of its turnaround strategy, the company could achieve earnings per share in accordance with forecasts during 2024 and 2025 (59 cents and 83 cents, respectively).
Attaining consistent and rapidly increasing profitability points toward further potential ahead for LYFT stock, even after the recent burst of enthusiasm for shares. This renders it one of the most promising meme stocks to acquire.
Occidental Petroleum (OXY)
Source: T. Schneider / Shutterstock.com
Occidental Petroleum (NYSE:OXY) continues to be highly sought after among the meme stock community. This might be attributed to the ongoing acquisition of the stock by Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B).
Nevertheless, to some, it might appear that attaining Buffett’s “seal of approval” has caused shares to become overpriced.
OXY stock trades at 14.2 times forward earnings, whereas comparable entities in the energy sector trade at forward valuations in the high single-digits to low teens. Yet, while Occidental may seem overvalued based on its forward P/E, a Seeking Alpha commentator recently contended that shares are a bargain at current prices.
Furthermore, the anticipated advantages from Occidental’s imminent acquisition of CrownRock, in conjunction with other factors such as share buybacks, could all act as catalysts to propel shares higher. All this may elucidate why Warren Buffett continues to be as bullish on this stock as the meme traders.
Super Micro Computer (SMCI)
The Best Meme Stock to Bet On: Super Micro Computer
Source: shutterstock.com/cono0430
If you’ve read my coverage of other AI hardware stocks, you may think I wouldn’t consider Super Micro Computer (NASDAQ:SMCI) one of the best meme stocks to buy.
Defying Skepticism
While I’ve been skeptical about the speculative frenzy surrounding another major name in this category, it may be sustainable here.
Riding the Generative AI Wave
Why? SMCI stock has skyrocketed higher, as this company cashes in the generative artificial intelligence boom.
Valuation and Growth Potential
While certainly not cheap at 40.7 times forward earnings, this valuation is reasonable, when compared to expected future growth.
Super Micro Computer has experienced rapid growth over the past two fiscal years. During the next fiscal year (ending June 2025), growth will stay at elevated levels. Consensus calls for revenue growth of 33%, and earnings growth of 30.7%.
Potential for Shares to Climb Higher
This may be enough for SMCI to maintain its earnings multiple, with shares climbing higher in tandem with increased earnings.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
