Uncovering breakout potential in MicroStrategy, Micron, and Chipotle Mexican Grill
Source: Marcus Krauss / Shutterstock.com
Since the rise of Reddit stocks during the pandemic, it remains prudent to monitor discussions for signs of emerging trends in retail trading activity. While some have predicted the end of meme stocks following interest rate hikes by the Fed, speculative trading remains prevalent. Fueled by individual retail investors, the recent highs in gold and Bitcoin (BTC-USD) and the Reddit (NYSE:RDDT) IPO, there seems to be a breakout in discussion trends of Reddit stocks in March.
Despite the rising activity, not all Reddit stocks can become a meme phenomenon. In fact, most social media discussions will not experience significant movement. It can also be difficult to determine cause and effect, as rising share prices tend to attract more online mentions on forums like WallStreetBets. Some stocks, like Nvidia (NASDAQ:NVDA) and Taiwan Semiconductor Manufacturing (NYSE:TSM), see heavy volume simply due to their size and growth, not because they are discussed as Reddit stocks. In contrast, others like Digital World Acquisition (NASDAQ:DWAC), gained attention from events unrelated to social media activity.
Three Reddit stocks recently attracted attention, warranting analysis to assess their potential and separate hype from substance. Examining discussions and performance can help identify companies poised for growth versus those relying primarily on speculative fervor.
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) was previously a stock that was heavily talked about on online discussion boards but over the last month, Reddit discussions have grown again. That’s likely due to the company’s position as the largest institutional holder of Bitcoin. With the premier cryptocurrency’s price rising recently, it has naturally come back into focus as a stock to pay attention to. Nonetheless, MSTR has been declining lately along with Bitcoin’s price. However, this drop could position MSTR stock at a price favorable for interested parties seeking to capitalize on additional BTC upside.
The company is reinvesting all profits into Bitcoin while paying no dividends and issuing additional shares to acquire even more Bitcoin. This bold strategy has left approximately 20% of the company’s market capitalization sold short, raising the possibility that it could once again become subject to a short squeeze — and even more Reddit discussion.
Micron Technology (MU)
Micron Technology (NASDAQ:MU) is another one of the Reddit stocks that has been gaining attention. Working in artificial intelligence (AI), it also saw increased discussion on social media platforms ahead of its earnings. While the business realized net losses in its prior fiscal year, market participants appeared optimistic. They believed the company had good potential for a turnaround, supported by increasing requirements for computer chips used extensively in AI applications. And they were right.
Micron reported much better than expected results and provided strong guidance on Wednesday. It earned an adjusted 42 cents per share on revenue of $5.82 billion, handily beating estimates of a loss of 25 cents. Its stock price rose 13% after hours, with analysts raising their target price before the report. Although a pullback can be expected, analyst coverage predominantly suggests a buy, with forecasts pointing to further upside over the coming year.
Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (NYSE:CMG) stands apart from typical technology companies that often attract attention in social media investing circles. Still, it makes perfect sense as the final Reddit stock breaking trends. Over the past few days, interest in Chipotle has skyrocketed by over 4,700%, coinciding with a 7% rise following the announcement of an upcoming 50-for-1 stock split. Chipotle is executing the split to adjust its stock valuation in light of rising share prices and make its shares more accessible to individual investors.
Despite challenges in recent years, Chipotle has consistently delivered annual sales growth under management’s leadership. They remain confident in the company’s ability to continue expanding its business. Analysts are also bullish on Chipotle stock due to the company’s strong fundamentals, growth outlook and premium valuation. In its recent earnings report, Chipotle posted 14.3% revenue growth to a record $9.9 billion, and EPS surged 36.9% to $44.86.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.