The poster child that spawned the meme stock craze was video game retailer GameStop, as it short-squeezed from $19 up to $483 in weeks. This mover caused many hedge funds to blow out as retail traders in large numbers claimed victory over Wall Street.
However, that victory was short-lived as meme stocks deflated as quickly as they inflated during the bear market 2022. As the smoke clears and the stock market recovers in 2023, retail traders wonder what the next meme stock will be that spawns another meme stock mania.
In this article, we will review six stocks that could be the next big meme stocks leading the resurgence of the meme stock craze.
Factors influencing meme stock popularity
Making stock picks based on social media platforms is inherently risky, so it's essential to understand what influences the popularity of these volatile meme stocks. Here are a few places where meme stocks can gain momentum:
- Reddit: The original birthplace of the meme stocks was Reddit, specifically the Wall Street Bets forum where GameStop trader Keith Gill earned his following. While many of the members post less than valuable information, viral trends can be found early on Reddit. Traders often look for social media engagement and stock volume to confirm meme stock trends.
- Social media: Discord, Twitter and even Facebook and Instagram can launch viral meme stock trends. Trending stocks often break through on social media when the upswing has already started, but quick traders can ride the momentum as more retail investors take notice.
- Celebrity endorsements: Remember Tom Brady and Matt Damon in cryptocurrency commercials? Or QQQ ads during college basketball games? Investing is mainstream now, and celebrity endorsements of companies and assets have become a thing in recent years. Whether it's Shaq selling a new crypto token or Dave Portnoy picking stocks, you can find public figures talking about markets. Just take these endorsements with a grain of salt; celebs get paid for the ad, not for investing in the asset.
What is the next meme stock?
A "meme" refers to viral internet content in images with funny captions.
Meme stocks are low-priced stocks that ran up in price for no particular fundamental reason other than short-squeezes perpetuated by retail investor enthusiasm and social media hype. The ridiculous nature of the underlying price move exposed it to ridicule with clever memes that would gain popularity and go viral. Meme stocks are closer to penny stocks than blue-chip stocks and don’t pay dividends. The meme stock bubble of 2021 was a mania that melted in 2022.
Even after the meme stock surge and bust, speculators are always searching for the next meme stock. Top meme stocks have certain requirements to qualify as potential meme stocks. Their fundamentals should be pretty negative, which draws in bears and short sellers who expect the stock price to fall lower. Logically, this makes sense since the fundamentals usually determine a company's underlying stock price. This negative sentiment causes short interest to rise, another key factor for meme stocks. Meme stocks must have a high short interest to spark a short squeeze. Meme stocks should have social media buzz, a huge rising volume and a small float.
Identifying the next meme stock
Which stocks will go viral next? The answer is tough because the environment that made meme stocks viable no longer exists. Stocks have gone parabolic since the beginning of public markets, but meme stocks existed during a very unique time. GameStop Corp going parabolic required a confluence of events that will be hard to replicate.
Meme stocks rose when rates were low, stimulus money was flowing and Americans were spending most of their time at home while COVID ran wild. The signals that sent stocks flying during the first half of 2021 won’t be the same ones that precede the next viral stock surge. Here are 2 schools of thought on identifying the next parabolic meme stock.
Data analysis and trends
Good old statistical analysis is one method of locating meme stocks. Data like volume and short interest can help spot good meme candidates. And then trading tools like moving averages, momentum oscillators and support/resistance concepts can narrow down entry and exit points to maximize profit. Technical and fundamental analysis has been applied to stock research for decades, and meme stock prices are influenced by many of the same factors as other volatile stock segments.
Market sentiment analysis
Meme stocks like GameStop and AMC wouldn’t appear on any screener showing revenue growth or high profit margins. In fact, these companies would show just the opposite - declining sales, poor margins and minimal future growth prospects.
So why do traders still flock to meme stocks? Sentiment! Hedge funds and experienced investors know these aren’t long-term stock picks, they’re a wave meant to be ridden and abandoned when volume dries up. How can traders track market sentiment on meme stocks? One useful page is MarketBeat’s media sentiment tracker, which uses a language processing algorithm to measure positive or negative headlines regarding trending stocks.
Which stock will be the next GameStop?
That is a guess at best. GameStop was unique because it had a 140% short interest, which is only possible through extensive naked shorting. That was the fuse triggering the short squeeze, which then took on a life of its own as it moved higher. Even GameStop can’t be the next GameStop stock with just a 16.95% short interest repeating what happened at the dawn of the meme stock bubble. The next GameStop stock will have to have more than a 100% short interest.
A look at the first meme stock helps to provide an idea of what can transform a stock into a meme stock. GameStop was a dying video game retailer, one of the last ones standing. GameStop stock had a 140% short interest, making it highly susceptible to a short squeeze, akin to lighting a match in a kerosene-soaked warehouse.
To have a short interest over 100% means there are illegal naked shorts. The float was also relatively small, at just over 56 million shares. Many astute retail traders figured if GME shares were to rally, it could cause a crazy short squeeze as the overcrowded short side would be forced to cover to avoid taking large losses.
The higher the price of GME rose, the more that shorts would chase it to buy and cover their short positions. Additionally, forced margin calls would automatically trigger short covering surges of buying pressure.
GameStop had already risen from $4 to $19 in the months leading up to the meme stock mania. It ushered in the meme stock era during its historical climb from $19 on Jan. 14, 2021, to a high of $483 on Jan. 28, 2021.
Retail traders and popular Reddit forums like Wallstreet Bets viewed GME as a way to "stick it" to Wall Street, or “Eat the Rich," as rich hedge fund managers took a bath in the squeeze while the average little investor and speculator got rich. This theme underscored a movement that united retail investors as social media was abuzz, and legions of retail investors scoured social media sites for what's new meme stock-wise.
The Reddit message boards and social media users jumped on other stocks with horrible fundamentals, small floats and high short interest, eventually calling them meme stocks. New meme stocks were christened almost daily. The world’s largest movie theater operator AMC Entertainment Holdings Inc. NYSE: AMC, became synonymous with the meme stock frenzy as shares squeezed from $2 to $72.62 on June 2, 2021.
Many stocks latched onto the meme stock frenzy, including photography supplier Eastman Kodak NASDAQ: KODK, which rallied from $2 to $60 in July 2020. Blackberry Ltd. NYSE: BB rallied from $6.52 up to $28.77, and luxury electric vehicle (EV) startup Lucid Group Inc. NASDAQ: LCID was a special purpose acquisition company (SPAC) Churchill Capital Corp. that surged to a high of $64.86 from $10. Ultimately, meme stocks lost momentum and sold off in the correction of 2022.
GME had a four-for-one stock split on July 6, 2022. GME eventually fell to a low of $61.54 (pre-split) on Jan. 6, 2023. The rally in the stock market in 2023 may set the stage for another meme stock rally. While everyone is searching for how to find the next meme stock, we have a list of six that could be the ones.
6 choices for the next meme stock
Here is a list of six stocks that may usher in the next meme stock frenzy or just short squeeze by themselves. While everyone wants to know, "What is the next meme stock to surge?" it’s important to know what happens to most meme stocks.
Each potential meme stock on this list has weak fundamentals, relatively small float and high short interest, which can trigger social media buzz and surging volume as prices rise. Many of the stocks on this list had significant rallies in 2023 due to short squeezes, so do your research before taking any positions. Here’s our list to answer the question, "What is the next meme stock to make headlines?"
1. Tupperware Brands Co.
The iconic plastic storage wear and kitchen product manufacturer, Tupperware Brands Co. NYSE: TUP, has seen its stock collapse on weakening sales. The company doesn't sell its products in stores but through its direct sales and multilevel marketing (MLM) through independent reps hosting "Tupperware parties." Its antiquated selling model has been a key detriment to its downfall because you can buy plastic containers online through numerous outlets at much lower prices.
Tupperware has virtually no competitive advantage, and its sales model is a hindrance rather than helpful. The company also sells kitchen utensils and products from cutting boards to measuring cups. The company, or the "consultants," also sells cosmetics and travel container products. The company has seen declining sales and has pushed back its 10-K report, and received a non-compliance listing notice from the New York Stock Exchange on June 7, 2023. All this seems like very bearish news, so its short interest rose to 27%.
2. Carvana Co.
Used car reseller known for their massive automobile vending machines, Carvana Co. NASDAQ: CVNA was once a $376 stock in August of 2021 before plunging to a low of $3.55 by December 2022. There's nothing quite like a downgrade to a $1 price target with bankruptcy concerns to crush sentiment on stock and suck in short sellers.
On November 22, 2022, Morgan Stanley analyst Adam Jonas warned that CVNA could be a $1 stock due to the deteriorating car market and high interest rates. On December 7, 2022, Wedbush downgraded shares of CVNA to $1 as analyst Seth Basham believed the company would run out of cash by the end of 2023, based on news that its largest creditors signed an agreement for cooperating in a restriction.
Carvana shares have already been in a short squeeze as shares rose as high as $57.19 and have rallied over 1,000% in 2023. The short squeeze caused short interest to fall back to 21%, but anything above 20% is still considered a high short interest.
3. Upstart Holdings Inc.
Artificial intelligence (AI) powered cloud-based lending platform Upstart Holdings Inc. NASDAQ: UPST sought to disrupt the lending industry. The platform accesses over 1,000 data points instead of conventional credit scores to better assess a borrower's creditworthiness.
It connects borrowers with lenders, including more than 60 banks and credit unions, to find the right match. The company claims that deriving a credit score is more accurate, reduces lenders' default risk, and provides borrowers with faster and more personalized loans. UPST reached a high of $401.49 in October 2021 and fell to a low of $11.93 in May 2023. UPST shares are up over 430% in 2023, propelled by its 37.44% short interest.
4. Beyond Meat Inc.
Plant-based meat producer Beyond Meat Inc. NASDAQ: BYND kicked off the plant-based meat frenzy when it went public in 2019, reaching a high of $239.71 in July 2019. BYND fell to a low of $48.18 and bounced back to $221 by January 2021.
It sold off to a low of $9.92 in June 2023. Despite its partnerships with well-known fast and casual restaurants, sentiment turned sour as the competition crawled out of the woodwork, diluting its market share. The supply chain disruption during the pandemic also impacted operations. The company has not profited in its operating history since its launch in 2009. BYND has a 36.86% short interest. Shares only gained 27% in 2023.
5. Allogene Therapeutics Inc.
Clinical-stage biotech Allogene Therapeutics Inc. NASDAQ: ALLO specializes in immunotherapy for oncology. They develop allogeneic chimeric antigen receptor T (CAR-T) cell therapies for treating solid tumors. CAR-T is an immunotherapy that uses a patient's T-cells to fight cancer.
T-cells are white blood cells responsible for fighting infections. The process involves extracting a patient's T-cells and modifying them to produce specific receptors on the outside known as chimeric antigen receptions (CARs). These CARs are multiplied in heavy quantities in a lab and re-infused into the patient's body. The CARs can identify specific antigens on the surface of cancer cells to target them for termination. CAR-T treats lymphoma and leukemia successfully but can cause cytokine release syndrome (CRS).
Allogenic CAR-T is also called "off-the-shelf," where other T-cells are donated rather than a patient's, allowing for speedier and more consistent treatment. It's also beneficial for cancer patients with low or unhealthy T-cells. One of the biggest threats is the potential for graft-versus-host disease (GVHD), where the donated T-cells attack the patient's healthy cells as it views them as foreign. ALLO shares reached a high of $55 in May 2020 and fell to a low of $4.30 in June 2023. ALLO has a 53.88% short interest.
6. C3.ai Inc.
The artificial intelligence (AI) mania hit its full strike in 2023 as it hit the mainstream through the viral acceptance of ChatGPT. C3.ai Inc. NYSE: AI provides enterprise AI solutions and consulting to major companies like oilfield giant Baker Hughes Inc. NYSE: BHI, aerospace giant The Boeing Co. NYSE: BA and the world’s largest defense contractor, Lockheed Martin Co. NYSE: LMT.
C3.ai has over 100 Fortune 500 companies using its platform. It also has the best stock symbol AI when AI integration and usage is a major tailwind. AI shares peaked at $183.90 in December 2020 before selling off to a low of $10.16 in December 2022. The global AI frenzy has sent AI shares up over 260% in 2023. The company has a 34.95% short interest. The short interest climbed on a bearish report released by Hindenburg Research, which sent shares falling by nearly 40% before surging through its yearly highs, peaking at $48.87 in June 2023.
Avoid the FOMO
What is the best meme stock to buy? Meme stocks and their trading patterns are constantly changing. Some of the best meme stocks have made strong moves higher in 2023. The "best" meme stock may often have climbed the most but also has the highest probability of falling back down. The best meme stock to buy meets the criteria of poor fundamentals, high short interest, a small float with social media buzz and rising volume. Check out our list of six that could be the next meme stock to make headlines.
Meme stocks rely on the fear of missing out (FOMO) and short-squeezes to accelerate and maintain their altitude. FOMO drives the pain of a missed meme stock, making you anxious to jump on the next big meme stock.
It's vital to control your emotions should you take a position in a social media meme stock. Remember, they are best for trading as underlying fundamentals tend to be weak, which causes bears to short the stock, resulting in high short interest. Meme stocks don't have to be rational. The more irrational it is, the more likely short-sellers get involved and the more potential it has to short squeeze.
However, it's worth noting that every meme stock mentioned in this article has sometimes fallen over 90% from its highs. For this reason, they can be dangerous and are only worth holding if you get in at a good price and things are fundamentally improving.
FAQs
Here are a few frequently asked questions about meme stocks and social media trading:
What is the best meme stock to buy?
The best meme stocks to buy are usually beaten-down companies with a small market cap and a high percentage of shares sold short. Look at stats like volume, short interest and short-term moving averages to locate good meme stock candidates.
Which stock will be the next GameStop?
There may never be another GameStop. The GameStop saga was a combination of bored and nostalgic retail investors, massive short interest, pandemic-related stimulus money and a social media community going viral. The conditions required to create another substantial short squeeze like that may never materialize again, but it certainly isn’t the end of short squeezes (or anger at hedge funds).
What meme stocks are trending?
To search for trending meme stocks, be sure to visit MarketBeat’s Meme Stock list to compare companies based on figures like share price, short interest, social media engagement, market cap and volume. And remember that a meme stock is a short term trade, not a good investment for the long run.
Before you consider Tupperware Brands, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Tupperware Brands wasn't on the list.
While Tupperware Brands currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.
