Meme stocks became all the rage among retail investors during the COVID-19 pandemic. Meme stocks are created when a company's shares catch fire with individual investors on social media platforms such as Reddit and quickly skyrocket in price. But, as many traditional investors and analysts point out, these viral stocks can be very risky since they rely on high interest from small investors to sustain the stock prices' liftoff "to the moon."
However, simply writing off all meme stocks as too risky can be a mistake. For the right person, investing in the right meme stock for the right reasons can make a lot of sense.
What are meme stocks?
Meme stocks are a battleground. More traditional investors decry the lack of business fundamentals and strong performance to justify sharp surges in stock price. On the other hand, as individual investors point out, given enough support from the masses, a climbing stock price (regardless of current fundamentals) can eventually equate to a stronger business. This comes from renewed consumer interest, along with a rebounding share price or the raising of fresh cash through capital markets when the stock price rises.
How meme stocks work
Simply put, meme stocks skyrocket in price in a short period (often hours or days) because of a sudden surge in interest online or on social media and subsequent buying among small individual investors. These short-term surges can often reverse course just as quickly, though, making meme stocks far more volatile than average stock market moves.
The word "meme," from the ancient Greek word "mimema" -- meaning imitation -- is used to describe information that is imitated and often spread via pop culture references on social media. So a meme stock is a shared investing idea imitated by other investors.
Top meme stocks right now
Now in year four of the movement, new meme stocks are being created all the time as individual investors look for new ways to beat the stock market. Here are five to do some more digging on (beyond arguably the two most famous meme stocks — video game retailer GameStop (GME -3.29%) and the world's largest movie theater chain AMC (AMC -4.70%).
Company | Market Cap | Company Description |
|---|---|---|
Rivian Automotive (NASDAQ:RIVN) | $11.2 billion | EV company ramping up sales of its electric SUV and pickup trucks. |
Blackberry (NYSE:BB) | $1.3 billion | Smartphone darling of the 2000s turned software company. |
SoFi Technologies (NASDAQ:SOFI) | $6.8 billion | Fast-growing online banking, lending, and investment services |
Palantir (NYSE:PLTR) | $53.4 billion | Software company specializing in big data, AI, and digital transformation. |
Virgin Galactic (NYSE:SPCE) | $178.8 million | A former SPAC stock and aspiring pioneer in space tourism and travel. |
1. Rivian Automotive
NASDAQ: RIVN
Key Data Points
Rivian is currently in the midst of "production hell," a phrase coined by Tesla CEO Elon Musk when his company was trying to ramp up factory production to stem cash losses. Rivian has had hiccups scaling its R1T electric truck production, but it's making progress.
At this point, it's a race against the clock. Its free cash flow was negative $1.5 billion in the first quarter of 2024. Rivian needs to get itself to breakeven before its cash and short-term investment balance ($6 billion at the end of March 2024) dries up.
2. Blackberry
NYSE: BB
Key Data Points
This Canadian company is known for pioneering the smartphone, but it quickly went by the wayside when Apple revolutionized the space. These days, Blackberry is a software firm that provides endpoint security software and other Internet of Things management products for customers such as the auto industry.
3. SoFi Technologies
NASDAQ: SOFI
Key Data Points
SoFi's financial services -- all unified together via a singular app -- got its start in the student loan niche of the industry. But since becoming a public company, the fintech stock favorite has gotten aggressive, expanding its reach and has added a few million new customers in recent years. As with other fast-moving businesses, SoFi's biggest hurdle now is how quickly it can focus on breakeven.
4. Palantir
NASDAQ: PLTR
Key Data Points
A member of the hot 2020 IPO stock class, Palantir quickly gained a large investor following after making its public debut. The company builds enterprise big data and AI software that helps organizations update their operations for a digital era. Palantir has concentrated exposure working for government entities, but it's quickly working to expand further into the private sector.
5. Virgin Galactic
NYSE: SPCE
Key Data Points
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About the Author
Nicholas Rossolillo has positions in SoFi Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends BlackBerry. The Motley Fool has a disclosure policy.
