Let's face it -- most so-called "meme stocks" end up being busts. The memes are meant to generate bullish interest in a stock that isn't doing so well on its own. But, most companies featured in a meme just aren't particularly strong. That's why most of them struggle to hold on to their meme-driven gains. This approach might work for a while, but eventually a stock reflects the company's underlying value.
There are a handful of exceptions to this norm, however. Some meme stocks' underlying companies operate legitimate businesses with real growth prospects. Be sure you're not dismissing them as potential purchases just because they're being lumped in with tickers of companies with questionable futures. Here's a closer look at three top picks.
1. Nio
For years it felt like Tesla's hold of the electric vehicle market was so strong that no other manufacturer need bother entering it. Slowly but surely, though, newcomers have chipped away at Tesla's dominance, proving the king of EVs isn't impervious.
China's Nio (NIO -1.45%) is one of those newcomers, and one of the better ones. While the company's 83,000 electric vehicles delivered through September 2022 doesn't hold a candle to Tesla's 2022 pace of more than 900,000 for the same three-quarter stretch, it's a start. It's also progress. Nio only delivered a little over 91,000 vehicles during the entirety of 2021, overcoming lots of logistical and supply hurdles in 2022 to put itself on pace to eclipse the previous year's output.
The real story here, however, isn't strictly Nio's growth to date. It's the EV industry's tide Nio is plugging into, and will continue plugging into for the foreseeable future. Market research and consulting outfit Deloitte estimates the world will purchase 31.1 million electric vehicles in 2030, up from 2020's 2.5 million and nearly tripling 2025's projected unit sales of 11.2 million.
The kicker: Deloitte's outlook also suggests nearly half the planet's EVs will be bought and driven in China by 2030, where Nio has something of a home-field advantage.
2. Palantir Technologies
It's not a household name. There's a good chance, however, you or someone living in your household has benefited from software Palantir Technologies (PLTR -0.74%) provides.
Simply put, Palantir turns lots of abstract, seemingly arbitrary digital data into actionable information. While its tech can be employed by a variety of public and private customers, it's particularly well suited for government applications. The U.S. Centers for Disease Control tapped Palantir for help monitoring the COVID-19 pandemic and then deploying vaccines, for example, while the Department of Defense is using the company's software to build and test artificial intelligence solutions to be used on the front lines of combat. Its private/civilian customers include the Scuderia Ferrari racing team, mortgage loan lender Better, and drugmaker Sanofi just to name a few. The more data enterprises collect, the more they realize they need a solutions provider like Palantir Technologies to better utilize it.
Palantir's 2022 revenue is expected to come in 23% higher than 2021's, while 2023 revenue should be 21% better than 2022's. The company's also profitable despite its relatively young age.
So why is the stock down 85% from its January-2021 peak? Timing, mostly.
Palantir Technologies only went public in late-2020, just as meme-stock mania was moving into high gear. Its growth-minded backstory caught the attention of enough like-minded traders who made a point of catapulting it higher. Shares rallied too far, too fast, however, inspiring lots of profit-taking that's been exacerbated by a weak overall market. Just don't read too much into it. It's not an indictment of the company's future.
3. Nokia
Finally, add Nokia Oyj (NOK) -- you know it better as just Nokia -- to your list of meme stocks with legitime long-term upside.
Yes, this is the same Nokia that helped pioneer the mobile phone business. You'll still come across a Nokia phone every now and then, although its wireless handsets are neither market-leading nor a breadwinner for the company. Its big business these days is telecom infrastructure. Private wireless solutions, land-based networking, and even underwater connectivity are all in its wheelhouse. Cloud computing, data centers, the Internet of Things (IoT), and the software needed to get the most out of telecom hardware are also part of its repertoire.
And it's landing some major customers with these products. British Telecom recently inked a deal ensuring access to Nokia's AVA software, which will improve the telco company's network-monitoring capabilities. Also, O2 Telefonica Germany and Nokia jointly announced recently they had successfully completed the industry's first two-component carrier aggregation using a 5G connection with sub-6 GHz spectrum. In laymen's terms, this successful high-speed, high-density transmission of digital data means carriers can offer more powerful, faster connectivity. In November, Nokia was selected by Chile's San Antonio Terminal Internacional to build the industry's first-ever industrial-grade LTE private network.
This company's products solve real-world problems -- there will always be demand for them.
It may never be a high-growth outfit again, but Nokia is a company with staying power and sustainable profits. Newcomers will be stepping into the stock while it's priced at only about 10 times 2023's projected per-share earnings of $0.45, and priced 30% below the current consensus target price of $6.15.
