While 2020 was fairly a 12 months for electric vehicle stocks, 2021 is to date dominated by meme shares. Earlier this 12 months, meme shares turned common as retail traders despatched the value of GameStop (NYSE:GME) to ridiculous heights. GME inventory went from $19.95 on Jan. 12 to $325 on Jan. 29.
Source: Michael Vi
This 1,529% acquire over two weeks was attributed to merchants in Reddit’s r/WallStreetBets discussion board pumping up the inventory to create a brief squeeze. Traders repeated this for just a few extra shares earlier than issues quieted down in February. But meme shares have just lately made a comeback, with shares of corporations like Blackberry (NYSE:BB) and AMC Entertainment Holdings (NYSE:AMC) hovering. These shares should not rising as a consequence of firm efficiency; as an alternative, their good points end result from social media consideration.
Even although main corporations like Apple (NASDAQ:AAPL) had stellar earnings outcomes, their value efficiency is being dwarfed by these speculative shares. Are these corporations even a worthwhile funding?
I’d prefer to reply that query by highlighting two shares which have generated sturdy returns because of Reddit: Wendy’s (NASDAQ:WEN) and Palantir Technologies (NYSE:PLTR).
Wendy’s is the world’s third-largest quick-service restaurant firm, working in three segments: Wendy’s U.S., Wendy’s International, and Global Real Estate & Development. Their eating places provide conventional fast-food fare like sandwiches and fries, and are identified for his or her hamburgers and Frosty desserts.
Wendy’s turned a red-hot meme inventory on June Eight when Reddit merchants spoke favorably concerning the firm and shares spiked 25%. Traders have been drawn to the corporate for just a few causes, together with a brand new salad and an anticipated inflow of newly-vaccinated diners of their eating places.
First-quarter outcomes confirmed sturdy income, boosted by digital gross sales and particular merchandise like its entry within the rooster sandwich wars. WEN inventory has an total grade of B, which interprets right into a “buy” ranking in our POWR Ratings system. The firm has a Sentiment Grade of B, which implies it’s well liked by Wall Street analysts. Sixteen analysts have a “strong buy” or “buy” ranking on the inventory.
WEN inventory additionally has a Quality Grade of B as a consequence of a strong stability sheet. While the agency solely had $316 million in money as of the most up-to-date quarter, it has nearly no short-term debt. Plus, administration could be very environment friendly, with a return on fairness of 27.8%.
We additionally present Growth, Value, Momentum, and Stability grades for WEN inventory, which yow will discover right here. WEN inventory is ranked No. 22 within the A-rated Restaurants business. You can discover different high shares on this business by clicking right here.
Palantir Technologies (PLTR)
Palantir was based in 2003 and offers organizations with platforms for knowledge evaluation, administration and safety. In 2008, the corporate launched its Gotham software program platform, which offers instruments for presidency intelligence and protection evaluation. Palantir expanded into industrial markets with its Foundry software program platform in 2016. Foundry is supposed to function an working system for corporations that wrestle to interpret and handle knowledge in giant initiatives.
The firm turned a favourite of the r/WallStreetBets neighborhood late final 12 months because it developed software program to trace vaccine distribution throughout the U.S. While this system wasn’t a smashing success, meme traders are nonetheless enamored with the corporate’s science fiction-like knowledge evaluation.
While the corporate has sturdy potential, I do have just a few issues. Palantir’s options could solely turn into a distinct segment market. Additionally, it’s more likely to face competitors from bigger enterprise corporations and protection contractors in just a few years.
PLTR inventory has an total grade of D, translating to a “sell” ranking in our POWR Ratings system. The firm has a Value Grade of D, as its inventory appears to be like vastly overpriced with a ahead P/E of 188.68.
PLTR inventory additionally has a Stability Grade of D, indicating that its value and progress figures are extremely risky. For the remainder of PLTR’s grades (Growth, Momentum, Sentiment, and Quality), click on right here. PLTR inventory is ranked No. 11 within the Software – SaaS business. For top-ranked shares on this business, click on right here.
Which Meme Stock Is the Better Buy?
While PLTR inventory has quite a lot of potential, its risky value moments and excessive valuation make it a dangerous wager for now. I’m additionally involved concerning the stiff competitors it could take care of in a few years. Plus, the corporate has a “sell” ranking in our POWR Ratings system, which isn’t an excellent signal.
On the opposite hand, WEN inventory is rated a “buy,” has sturdy fundamentals and is the all-around higher firm. This is what makes Wendy’s an odd meme inventory. Most meme shares sometimes have poor fundamentals and are being pushed greater by a crowd of merchants. WEN inventory has stronger rankings, making it a much better choose than PLTR inventory.
On the date of publication, David Cohne didn’t have (both instantly or not directly) any positions within the securities talked about on this article. The opinions expressed on this article are these of the author, topic to the InvestorPlace.com Publishing Guidelines.
David Cohne has 20 years of expertise as an funding analyst and author. Prior to StockNews, David spent eleven years as a Consultant offering outsourced funding analysis and content material to monetary companies corporations, hedge funds, and on-line publications. David enjoys researching and writing about shares and the markets. He takes a elementary quantitative method in evaluating shares for readers.
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