3 popular Reddit stocks to buy long term
REddit users have taken the investment world by storm and become a surprising new power base this year, helping to generate huge gains for businesses, including AMC Entertainment Holdings and GameStop and highlight the influence of retail investors. While some Reddit stocks have a reputation for being short-term games, other preferred stocks by investors on the platform show promise. long term performance perspectives.
With that in mind, we assembled a panel of Motley Fool contributors and asked them to identify popular Reddit actions that could go the distance. Read on to see why they think these three companies have what it takes to make big wins.
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Keith noonan: ContextLogic‘s (NASDAQ: DESIRE) The stock has recently jumped after becoming a new favorite on Reddit’s WallStreetBets discussion board, and it could still be a worthwhile buy for risk-tolerant investors. The company operates Wish, a bargain-focused e-commerce platform that specializes in low-cost, non-branded products, and the business could significantly exceed expectations if it continues to make inroads with merchants and budget-conscious buyers.
ContextLogic went public last December and has seen volatile trading since its inception in the market. The stock climbed to around $ 33 per share following its IPO price of $ 24 per share, but the company’s valuation slumped as the market shifted away from tech stocks in favor of coins. reopening focused on value and a larger than expected loss in the first quarter. scared investors.
The stock is up about 36% from the low reached earlier this month thanks (at least in part) to the Reddit bump, but it is still trading around 69% from the high. earlier this year. With that kind of volatility, perhaps it’s no surprise that the stock has gained favor with investors on WallStreetBets.
Is ContextLogic the best company in the e-commerce space? No, that would be difficult to argue. However, the Wish mobile app has a large active user base, and favorable growth trends for the broader e-commerce market could help improve performance.
ContextLogic is valued at just 1.9 times expected sales this year, but it’s still a somewhat risky investment. The low price-to-sell ratio reflects concerns that the business is still operating at a loss and growing at a slower pace than the major e-commerce players, but the company’s valuation still leaves room for a steep rise , and patient investors could see a surge in stock returns.
Open Door Technologies
Jamal Carnette: Open Door Technologies (NASDAQ: OPEN) doesn’t have the traffic generated by popular meme stocks like GameStop and AMC Entertainment, but it’s backed by venture capitalist Chamath Palihapitiya. Palihapitiya has become an honorary “monkey” in chat rooms around the world for speaking out against pandemic bailouts and taking Virgin Galactic Holdings and Health Clover, two memes actions, public via reverse mergers SPAC.
The housing market is hot. Home prices posted an annual increase of 13.2% in the latest reading of the National Case-Shiller Home Price Index, the strongest annual growth in 15 years. You have to compete not only with buyers rich in pandemic savings, but also with institutional money like pension funds and investment managers like Black rock monopolize entire housing estates.
Yet the home buying process remains a holdover from the 20th century with many processes designed to enrich middlemen at the expense of retail consumers. Reinventing the home buying process and lowering transaction costs have the potential to expand home ownership, much like low cost trading has done for stock ownership.
This is Opendoor’s opportunity. The company mainly operates under the iBuying model, where the company will buy and sell homes directly to customers instead of playing the traditional role of agent, which is only for buyers and sellers. iBuying takes many of the headaches associated with traditional home sales, including working with real estate agents, doing repairs, and hosting open houses.
Of course, there are risks. More specifically, Opendoor assumes the inventory risk and faces potential “underwater sales” in declining markets which could have an impact on profitability. However, that was not a risk in today’s scorching red. housing market.
In the first quarter, the company reported a 7% increase in gross profit over the previous year, despite a 40% drop in revenue. The difference? Opendoor sold fewer houses but increased profitability per unit due to the appreciation in house prices. Investors don’t have to worry about falling revenue: the company forecast a 41% year-over-year increase in the next quarter.
Like most meme stocks, Opendoor is not for the faint of heart, but for investors with a high tolerance for risk and a long holding period, this could be the business disrupting the trillion housing industry. of dollars.
Joe tenebruso: Not all stocks even trade at astronomical valuations. In fact, a stock that has seen its mentions rise on Reddit in recent days is currently trading at one of the lowest price / earnings ratios (PER) ratios of all stocks I follow: Rocket companies (NYSE: RKT).
As the nation’s largest mortgage originator, Rocket Companies has benefited greatly from historically low interest rates. The parent company of Quicken Loans and Rocket Mortgage saw its revenue more than triple in 2020 to $ 15.7 billion, fueled by a 121% increase in closed loan origination volume, to $ 320.2 billion. Its net profit, in turn, more than increased tenfold, to $ 9.4 billion.
Rocket Companies was so profitable that it paid a special dividend of $ 1.11 per share to its shareholders. Its strong cash flow generation has also enabled it to accelerate its growth investments, which has contributed to strong increases in its auto services, home buying, title insurance, real estate appraisal and settlement.
Despite this impressive performance, Rocket Companies shares are trading less than 10 times analysts’ earnings estimates for 2021. That’s largely because the mortgage refinancing market is expected to cool this year, and investors fear that ‘a possible rise in interest rates does lead to further cuts.
However, rather than rising, the yield on the 10-year Treasury bill has actually fallen below 1.5% in recent days, and rates may stay low for some time. Low interest rates would bode well for Rocket companies – and for investors buying shares of the mortgage titan today.
10 stocks we prefer over Rocket Companies, Inc.
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Jamal Carnette, CFA owns shares of AMC Entertainment Holdings and GameStop. Joe tenebruso has no position in any of the stocks mentioned. Keith noonan owns shares of ContextLogic Inc. The Motley Fool owns and recommends shares of Clover Health Investments, Opendoor Technologies Inc. and Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.