Most investors can identify AMC Entertainment and GameStop as being among the top meme stocks, but the further down the list you go, the murkier it gets. Many might not realize that stocks like Apple or Tesla are also meme stocks in a sense; they have at times attracted sudden, outsized attention in internet chat rooms and social media and enjoyed a surge in their stock price as small, individual investors piled into their shares.
To most people, though, meme stocks are the market's underdogs, not industry titans. Their shares are heavily shorted as the so-called "smart money" bets their stocks will go down, and maybe even the company will go under. That's why AMC and GameStop are often the most recognizable since they are swimming against the tide, trying to turn their respective businesses around.
While there could be some good arguments in their favor, I believe instead that the two meme stocks below have the best potential to be long-term winners.
Image source: Getty Images.
1. Bed Bath & Beyond
Suffering from years of neglect and resting on its laurels, Bed Bath & Beyond (BBBY) saw its share of the home goods market erode as competition from the likes of Amazon, Walmart, Target, and Wayfair ended up doing better than what the retailer used to do best.
However, Bed Bath & Beyond began its turnaround much earlier than many other meme stocks that are today in hurry-up mode to survive. Its plans were just gaining traction when they got put on hold by the pandemic. However, the retailer is making smart business moves to survive and thrive in the future.
The market has been impatient with Bed Bath & Beyond's pace of progress -- such as after January's third-quarter earnings report missed estimates -- but underneath the hood the retailer saw record customer acquisition gains, adding almost half a million new members.
The company will report fourth-quarter results soon, and cash profits may be temporarily negative because of seasonal stocking up on inventory for the holidays. However, investors may want to use any weakness in its stock to jump in. GameStop's Ryan Cohen has taken an activist investor stake in the business and is calling for Bed Bath & Beyond to shed more businesses or even put itself up for sale.
There are a lot of moving parts with the retailer, but Wall Street expects profits to grow rapidly over the next five years as its turnaround plan gains traction once more. That could see its shares rise in tandem with them.
Image source: Ford.
2. Ford
Ford's (F -1.92%) inclusion on the list of meme stocks might surprise some, but it caught the attention of the Reddit crowd last year and its stock soared 136%. However, 2022 hasn't been as kind with the automaker's shares falling 28% so far this year.
That's due to the realities of the global supply-chain crunch causing a massive industry shortage of computer chips and other parts, rampant inflation, and rising interest rates. No doubt, the persistent problems are weighing on Ford, but it's also clear they're affecting everyone, not just the automaker.
Ford's trying to make the best of a bad situation. To generate sales, it's beginning to ship vehicles without non-safety-related chips installed, but promising to put them in within a year. Deliveries may still fall, regardless, as new-car prices soar, but investors can still buy into an otherwise solid stock at deeply discounted prices.
Shares of Ford trade at just three times trailing earnings and six times next year's estimate. It also goes for a bargain-basement six times the free cash flow it produces even as the company begins to flex its electric car muscles.
The automaker says it wants to be producing 2 million EVs by 2026, which could be achievable as its EV sales are already racing ahead of the industry. Its Mustang Mach-E continues to gain traction over last year, its Transit Pro commercial van just hit the market, and its F-150 Lightning pickup is due out soon.
Ford has the potential to light up sales in the years to come in both internal combustion engine vehicles and in its growing electric fleet.
