Top meme stocks land on retail trading discussion boards, such as Reddit's WallStreetBets, based on a rise in popularity for various reasons, including short-squeeze potential, baseless hype, and legitimate news and developments. Depending on your investment strategy, all of these reasons can lead to reward, but they can also come with a great deal of risk and regret for less-savvy investors.
Two companies that have been known to show up on lists of meme stocks don't necessarily require hype and are not found among companies with high short interest. BlackBerry (BB +0.74%), and Advanced Micro Devices (AMD +0.88%) offer investors minimized risk, solid products, and growth potential that can lead to big gains for the long-term investor.
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1. BlackBerry
Fiscal year 2021 (which ended Feb. 28) created somewhat of a conundrum for investors in BlackBerry. The company was in the midst of a transition from smartphones to a business model that relies on enterprise software and security solutions. But in doing so, its total revenue for the fiscal year was the lowest it's been in 17 years!
In June, the company found itself on the radar of retail trading discussion groups such as WallStreetBets, which helped push the stock price into the $15 to $16 range, from just $8 a share a month earlier. The question for investors was: Is this turnaround for real or is it simply the result of some community hype? The short answer in both cases is yes. The stock price jolt was short-lived, and it was back down to around $9 a share by August and has not seen anything close to the $15 level since. But this is a company showing signs that its transition will be successful in the long run.
BlackBerry generates a large portion of revenue from production-based royalties for QNX, its real-time operating system designed for safety and security. It's used in laptops, smartphones, and now in the digital dashboards of vehicles to provide crucial readings such as the fuel level -- or battery level for electric vehicles (EVs) -- and oil pressure, and also for infotainment systems. The company has design wins, generating additional revenue, with 24 of the 25 leading EV manufacturers, which account for 82% of the global EV production.
The design wins can keep on giving because once a vehicle moves onto the assembly line, production-based royalty revenue will kick in as well.
In its fiscal 2022 second quarter, the company had total revenue of $175 million, with $120 million of that coming from cybersecurity. But the great thing about its product sales is that it enjoys strong margins of 59% in security and 83% in the Internet of Things (IoT).
The next two important dates for BlackBerry will be in late December when it reports third-quarter results, and then the Consumer Electronics Show in January, where it will put on full display partner solutions built on BlackBerry IVY.
IVY is its intelligent one-source vehicle-data platform developed in collaboration with Amazon Web Services. It allows for improved vehicle operations and better driver and passenger experiences by storing and transferring data securely back to suppliers and automakers in order to improve safety-crucial systems.
BlackBerry stock may once again rise as a result of hype on community boards, but an expanded product line and the ability to claim design wins are signs that the company will complete its transition and become a successful long-term investment.
2. AMD
Like BlackBerry, AMD is a turnaround play, but this turnaround could give an investor whiplash watching the stock price fly up the chart. Seven years ago, Lisa Su took over as CEO and president, and the stock price was around $3. Today the price is around $140 per share. Yes, you read that right: If you had invested $1,000 in AMD in October of 2014 when Su took over, your investment would be worth over $46,000 today.
As a global semiconductor company, AMD focuses on advancing computing, graphics, and visualization technologies. As of early November, its customer list read like an all-star team in tech, led by Alphabet, Amazon, Microsoft, and now Meta Platforms (formerly Facebook). And on the gaming front, its Ryzen processors and Radeon graphics cards are providing desktop gamers with performance and visual delights.
After starting out with a plan to take market share from Intel, today's AMD leaves no competitor at ease. It has set it sights on the larger Nvidia by coming out with a new chip to focus on increasing speed for machine learning and artificial intelligence. And it aims to compete with up-and-comer Ampere Computing (which has Oracle as a customer) to serve cloud computing companies.
In the third quarter, revenue hit a record $4.3 billion, growing 54% year over year, resulting in earnings per share of $0.73. The increases were driven by a doubling of data center sales, highlighted by higher revenue in its computing and graphics segments. The company expects a 39% increase year over year in fourth-quarter revenue, leading to a revised upward guidance for full-year revenue to grow at 65%, rather than the previous 60% projection.
Strong growth in revenue and earnings has the stock price up 38% since early October, helped along by anticipation of AMD completing its acquisition of Xilinx (XLNX +0.00%) in the near future, and an increased showing on Reddit boards.
The recent run-up has led some to believe the stock is overvalued, resulting in some profit-taking driving the stock down to its current price around $138 from a 52-week high of $164, set a little over a week ago. But long-term investors can probably rest assured that the revenue pattern, combined with the expansion and success of product solutions, gives AMD the credibility to be part of a long-term investment strategy.
