Reddit has become a hub for social-media driven traders and investors that have proven their ability to maneuver the markets, injecting huge volatility into stocks like GameStop and AMC. But what stocks are grabbing attention on Reddit today?
Blackberry shares are live today after it released second quarter results after the closing bell yesterday, beating expectations and announcing its chief operating officer is leaving. Revenue fell to $175 million from $266 million the year before, but was better than the $163.5 million forecast by analysts. Cybersecurity revenue was flat year-on-year at $120 million and IoT revenue rose to $40 million from $31 million, but that wasn’t enough to offset the anticipated fall in licensing revenue because it continues to barter the sale of a part of its patent portfolio. The firm had aid it had been within the progress of signing a definitive deal a few of months ago but did not provide a cloth update on this front yesterday. Blackberry also warned that significant headwinds, like the chip shortage reducing demand from the automotive sector for its QNX platform, will continue over subsequent two quarters. It reported an adjusted loss per share of $0.06, turning from an $0.11 profit last year, but that was also marginally better than the $0.07 loss Wall Street anticipated. It also said president and COO Tom Eacobacci will leave at the top of the month and said it’s appointed John Giamatteo because the new boss of its cybersecurity unit.
SmileDirectClub shares shed 3% yesterday after sentiment soured following a downgrade from broker Stifel yesterday to carry from Buy. The stock, which has been extremely volatile and touted as a candidate to be subsequent short-squeeze, was downgraded over concerns it’s losing market share to rival Align Technology and facing pressure outside the US – having recently announced it’ll expand into France by the top of the year. Reports yesterday suggests over 48% of SmileDirectClub freefloat shares are being sold short.
TMC Metals shares plunged over 24% yesterday to shut at a replacement low, having completed its SPAC merger with blank-cheque firm Sustainable Opportunities Acquisition Corp earlier this month. Having initially rallied after completing its SPAC deal, the stock has lost ground as questions are raised about the value of its highly ambitious decide to produce battery metals by scraping nodules off the ocean floor.
Lucid Group shares broke their five-day streak yesterday after closing down 6.8%. The stock had been finding higher ground after revealing its Air Dream Edition, which is to be launched later this year, had been given a licensed range of 520 miles on one charge – over 100 miles quite its closest competitor, Tesla. Markets are going to be watching closely today to ascertain whether this is often the beginning of a reversal or just a blip for the stock. CFRA Research yesterday raised its price target on the stock, which has still risen by almost 20% over the last five days and trades at slightly below $25, to $35 from just $10 beforehand.
Shares in fintech firm SoFi rallied 6.3% yesterday to shut at $16.84, spurred on by broker Jefferies initiating coverage on the stock with a Buy rating and a price target of $25.
Facebook may be a new entry overnight after the stock tanked 4% yesterday to shut at its lowest level since July. That was caused by a blog post to advertisers that said it’s been underreporting ad performance on Apple iPhones, citing changes to Apple’s iOS OS . It estimated it’s underreporting web conversions on Apple’s iOS by about 15% after iOS changed so users had to opt-in to tracking, which is employed by the likes of Facebook to focus on personalised advertisements.
Clover Health has re-entered the highest 10 overnight after announcing yesterday that the Centers for Medicare and Medicaid Services (CMS) has approved its topographic point expansion to work in 101 new counties. which will kick-in from the beginning of 2022, expanding Clover’s Medicare Advantage plans across the new counties across Georgia, New Jersey, South Carolina, Texas and Alabama – the last of which is a completely new state for the business. this is often an outsized expansion considering its plans are only currently available in 108 counties.
Spire Global is another stock to re-enter the chart overnight after announcing it’s partnered up with Myriota, which provides low-cost satellite connectivity for the Internet-of-Things (IoT). Spire Space Services will help Myriota accelerate its deployment by using its low-earth orbit nanosatellites. It said Myriota is that the ‘first large-scale, commercial, IoT-focused customer of Spire’.The Reddit frenzy
Retail investors realised their potential power in early January 2021 when a loosely-coordinated strategy was formed on Reddit’s WallStreetBets chatroom to shop for shares and out-of-money call options on stocks that were being targeted by short-sellers to push the worth higher. the thought was to make a short-squeeze.
What is a short-squeeze?
A short-squeeze does what it says on the tin – it tries to squeeze short-sellers out of their positions. Short-sellers, mostly big institutional investors and hedge funds, bet that the worth of a stock will fall but, as retail investors pile in and push the share price higher, they’re forced to start out buying the stock to undertake to limit their losses. The buying by the large players only fuels the share price higher.
David vs Goliath
The fact many of the stocks being targeted are fundamentally flawed or failing adds increased risk into an already volatile picture. GameStop is an out-of-favour retailer that sells physical video games during a time when games are mostly being bought online, while others like Blackberry also are laggards from the past.
With this in mind, it’s unsurprising they were within the crosshairs of short-sellers that search for failing companies to bet against.
But why are retail investors banding together to shop for shares in flawed companies? This disconnect is partly explained by a growing resentment among the smaller players within the market, which afflict the thought of huge institutions taking advantage of a company’s failure through short-selling practices, creating what has been described as a ‘David vs Goliath’ battle.
It is important to notice that not all the foremost actively-discussed stocks on Reddit are struggling or being targeted by short-sellers. Many of the foremost mentioned stocks, like Apple, are simply popular among the community.
Reddit stocks and volatility
The stark movements in stocks like GameStop has demonstrated the facility and influence that social media-driven investors and traders can wear the market, having injected severe volatility into several stocks. Volatility presents opportunities for traders, and it doesn’t get more volatile than Reddit stocks immediately – even during an epidemic .
For example, we saw GameStop – the primary heavily-shorted stock to be targeted by social media-driven investors – go from below $19 at the beginning of 2021 to a replacement record high of over $347 by January 27, and therefore the share price has remained highly volatile ever since.