The “meme stock” boom has resumed, and both Reddit and DJT stocks have risen sharply due to the fanaticism of individual investors. Analysts believe that stock price changes are mainly driven by market sentiment and capital flow, and have nothing to do with fundamentals.
Individual investors in the US stock market this week are due to Reddit and Trump's social media company$Trump Media & Technology (DJT.US)$I cheered for their appearance.
After DJT closed up more than 16% on the first day of listing, US stocks surged 14% to 66.22 US dollars overnight, reaching a market capitalization of about 8 billion US dollars. It is the most discussed stock on WallStreetBets, a popular stock trading forum on “US version of Tieba” Reddit, and ranked in the top 15 most traded stocks in Interactive Brokers.
According to financial documents, DJT's revenue for the first three quarters of last year was only 3.4 million US dollars, while losses reached 49 million US dollars. Obviously, the increase was not driven by fundamentals.
$Reddit (RDDT.US)$It is the fourth most traded company on Interactive Brokers. The company was listed on the NYSE last Thursday. The issue price was 34 US dollars, up 38.2% on the first day of trading. Although US stocks fell 11% to 58 US dollars overnight, the stock price still surged 70% from the issue price.
Reddit has been unprofitable for nearly 20 years. In 2023, the company's revenue was US$808 million, up about 21% year over year, and net loss narrowed from US$158.6 million in 2022 to US$90.8 million.
Wall Street's return to GameStop (GameStop) was “shocked” by the sharp rise in DJT and Reddit away from fundamentals, and the meme stock boom revived.
According to reports, “meme stocks” are also known as retail concept stocks. This type of stock usually violates mainstream rules in the financial world and its gains deviate from stock fundamentals, but for speculative purposes, individual investors go long and promote it on social media, making them popular on social networks and attracting more retail investors to buy.
According to VandaTrack's report, the net inflow of DJT of $6.5 million from individual investors on Tuesday was more than three times the size of the previous day's net inflow. Lucas Mantle, head of data science at VandaTrack, believes that “meme stocks” are characterized by intense market demand, and TMTG and Reddit definitely have the potential to become meme stocks. “I just need more data on the size of capital flows to make this judgment.”
Steve Sosnick, chief strategist at Yingtou Securities, said that the market is now very easily driven by momentum. One of the signs is that rising stock prices are no longer related to fundamentals, but are completely related to price changes. “Meme Shares” is the epitome of this mentality.
Steve Sosnick, chief strategist at Interactive Brokers, said: “We've seen significant capital flows. Our clients are usually attracted to high trading volume, high volatility, and high exposure situations, so it's not surprising.” Sosnick said:
The difference between “meme stocks” and ordinary popular stocks is the passion or fervor of the market. I think that definitely applies in the DJT case.”
Editor/Somer