Meme stocks remain a controversial topic in the stock market because they generate momentum based primarily on retail investors’ interest due to the buzz around them on various social media platforms. While the massive GameStop Corporation (GME) short squeeze earlier this year caused a stir in the market, the hype surrounding some famous names has begun to fade. However, some new names have been added to the meme stock frenzy and are causing buzz on the subreddit WallStreetBets.
Despite criticisms about explosive price gains being delivered absent commensurate fundamental strength, increasing retail trading based solely on social-media hype is far from over. Indeed, investors are actively looking for new short-squeeze candidates.
Alibaba Group Holding Limited (BABA), Tilray, Inc. (TLRY), and ContextLogic Inc. (WISH) are currently among the most-mentioned names on WallStreetBets. Consequently, Wall Street analysts expect these stocks to rally by 40% or more in price in the near term.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, China, BABA is a technology infrastructure and marketing company that helps merchants, brands, retailers, and other businesses leverage new technology and operate more efficiently. The company operates through four segments: Core Commerce; Cloud Computing; Digital Media and Entertainment; Innovation Initiatives, and Others.
Last month, BABA launched Alibaba.com Dropshipping Solutions and granted $500,000 to support existing e-commerce businesses and the rise of “New Digital Entrepreneurs" to reshape their future.
BABA’s revenue for the quarter ended June 30, 2021, increased 33.8% year-over-year to RMB205.74 billion ($32 billion). The company’s income from operations came in at RMB30.85 billion ($4.79 billion), and its net income amounted to RMB42.84 billion ($6.66 billion) during this period. Also, the company’s EPS grew 12.4% from the year-ago value to RMB2.08 ($0.32).
Analysts expect BABA’s revenue for its fiscal year 2022 to be $141.1 billion, representing 27.4% year-over-year growth. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to increase 16.1% next year.
The average analyst price target represents a 52.4% potential gain.
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Tilray, Inc. (TLRY)
TLRY is a cannabis supplier company that produces and markets medicinal cannabis products to the pharmaceutical sector. The Nanaimo, Canada, company operates through five segments: Cannabis Business; Distribution Business; Beverage Alcohol Business; Wellness Business; and Business Under Development. Also, its subsidiary, FHF Holdings Ltd (Manitoba Harvest), manufactures, markets, and distributes hemp-based consumer products.
Last month, TLRY’s Canadian subsidiary partnered with a local Quebec cannabis player, ROSE LifeScience Inc. (ROSE). ROSE should represent the full TLRY portfolio through this newly expanded partnership and should enable TLRY to grow further in the near term.
During its fiscal first quarter, ended August 31, 2021, TLRY’s net revenues increased 43% year-over-year to $168.02 million. The company’s gross profit grew 46% from its year-ago value to $50.96 million. Its Cannabis segment revenue rose 37.6% from the prior-year quarter to $70.45 million. Also, the company’s cash and cash equivalents came in at $376.3 million during this period.
TLRY’s revenue is expected to increase 45.2% year-over-year to $745.07 million in fiscal 2022. Its EPS is estimated to grow 75.6% in the current year.
The consensus price target represents a 43.4% potential gain.
ContextLogic Inc. (WISH)
Incorporated in 2010, San Francisco-based WISH is a mobile e-commerce company that provides a discovery-based shopping platform, which connects merchants' products to users based on user preferences. The company promotes its products on its platform through an advertising tool, ProductBoost. Also, it offers demand generation and engagement, user-generated content creation, data intelligence, promotional and logistics capabilities, and business operations support services.
This month, WISH partnered with the state-owned Spanish carrier Correos. The partnership will help WISH strengthen its position in Spain because Spanish merchants will be able to fill their WISH orders through Correos’ order management solutions, Soluciones, and WISH merchant’s dashboard. This will also help to optimize the customer experience and enable WISH to work with more local suppliers on a global scale.
WISH’s total revenue came in at $656 million for the second quarter, ended June 30, 2021. Its ProductBoost revenue increased 11.1% year-over-year to $50 million. The company’s gross profit amounted to $384 million during this period. Also, its cash and cash equivalents came in at $1.41 billion for the period.
For its fiscal year 2022, WISH’s revenue is estimated to be $2.26 billion, representing 0.6% year-over-year growth. Analysts expect WISH’s EPS to increase 96.1% next quarter and 88.9% in the current year.
The average analyst price target represents an 83% potential upside.
BABA shares were trading at $165.89 per share on Thursday afternoon, down $1.51 (-0.90%). Year-to-date, BABA has declined -28.72%, versus a 19.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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