It wasn't too long ago that stocks heavily mentioned in internet memes were names to avoid altogether. The crowd that was making (and responding to) the web's visually based snark didn't appear to be experienced investors, and the stocks they were talking about were often more like punchlines than savvy picks.
The meme stock crowd seems to have matured very quickly, though. While some of their favorite trades are still clearly far more speculative than not, some of their highly discussed names are prospects that long-term investors might actually want to consider. Here's a closer look at three such meme stocks that have the potential to be solid long-term picks.
Image source: Getty Images.
1. Snap
The past few months have been tough on many stocks, but they've been downright awful for social media names. Meta Platforms' share prices are down 50% from their September highs, with most of that loss suffered just since the company reported a first-ever quarterly decline in the average number of daily visitors to Facebook. Twitter is down too -- also by 50% since October's peak -- on concerns that its fourth-quarter earnings and user-growth shortfall are evidence of a bigger headwind. It's arguable that both social networking sites are finally suffering the effects of becoming too big without controlling the toxicity that size inevitably invites.
NASDAQ: SNAP
Key Data Points
Social media usage isn't dying, though. It's just changing. Consumers are increasingly turning to more casual, less divisive social networking venues like Pinterest and Snap (SNAP +0.00%), parent to Snapchat. Snapchat users' feeds are largely limited to their chosen circle of friends' posts, and there's little room to inject commentary that evolves into a digital feud. To this end, Snap's fiscal 2021 fourth-quarter revenue was up 42%, capping off full-year growth of 64%. The platform also added 13 million daily users during that three-month stretch, bringing its global headcount up to 319 million. That's 20% better than its year-ago user base.
It's not difficult to believe much of Snapchat's growth is coming at Twitter's and Facebook's expense. It's also not difficult to believe more of the same is in the cards.
2. Tesla
For years Tesla (TSLA 3.33%) was the only serious name in the electric vehicle game. But no longer. New players like Nio and Rivian Automotive are finally emerging, while the auto industry's stalwarts like Ford and General Motors are bringing their scale to the EV industry. Indeed, Ford's new Mustang, the Mach-E, has displaced Tesla's Model 3 as Consumer Reports' favorite electric vehicle for 2022. Consider it a sign that disruption is taking shape.
NASDAQ: TSLA
Key Data Points
The thing is, while Tesla must finally face legitimate competition, it's still the favorite EV brand in a market that's set to grow dramatically in the foreseeable future.
The United States Energy Information Administration's forecast on electric vehicle usage puts things in an eye-popping perspective. While there are only around 10 million EVs traversing the world's roads right now, the EIA believes that figure will swell to more than 670 million by 2050. That's more than enough business to go around; Tesla doesn't have to capture all of that market growth.
Investors won't have to wait quite that long to catch the tailwind, though. Still equipped with more production capacity than any other EV manufacturer, the analyst community believes Tesla's top line will grow more than 50% this year and more than 25% next year. That revenue growth should pump up profits from last year's $6.78 per share to $10.48 this year to $12.73 per share in 2023, making Tesla (by far) the world's most profitable electric vehicle venture.
3. Palantir Technologies
Finally, add Palantir Technologies (PLTR 3.29%) to your list of meme stocks that might actually pan out as a long-term pick.
NASDAQ: PLTR
Key Data Points
It's not a household name, but there's a good chance you or someone in your household has benefited from the company's products. Palantir Technologies makes software that helps organizations do useful things with the mountains of digital data many of them are sitting on. And these are high-level solutions. The U.S. Center for Disease Control, for instance, tapped Palantir last month to help it manage the next phase of its COVID-19 vaccine deployment efforts. Last year the Federal Aviation Administration asked the company to come up with an aircraft safety certification solution. Sports car make Ferrari, meanwhile, is using Palantir-made tech to win more car races. The sky's the limit, so to speak.
This lack of limitation hasn't impressed investors of late. Shares have fallen more than 70% from the early-2021 peak, after shares soared in response to news that the CDC was relying on Palantir's software to help manage the earlier stages of its coronavirus vaccine rollout. The market's spent the past year recognizing this surge was more than a little overzealous. The sell-off, however, has also moved into its overzealous phase.
Be advised that profits are still scant here, making Palantir Technologies a tricky name to own. Excessive volatility is to be expected, and more downside could be in the cards.
With yearly revenue growth near 30% looking like the norm for the foreseeable future though, any short-term setback isn't a major concern for true long-termers.
