3 Meme Stocks that r/WallStreetBets Loves (but Shouldn’t!)

Stocks to sell

GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) saw their shares skyrocket in early 2021 after several Reddit users incited a rally. Investors may have largely lost interest in these two stocks. However, a number of other meme stocks are loved by r/WallStreetBets currently. Maybe they shouldn’t.

U.S. equities are in the midst of a rally with the Nasdaq and S&P500 rising 7.97% and 7.02%, respectively, year to date (YTD). Moreover, the Russell 2000 Index, which tracks the performance of small-cap companies, is up around 2.26% YTD.

A good market may be giving Reddit loyalists high confidence, but below is a list of stocks they are better off selling.

Snowflake (SNOW)

The Snowflake logo on a company office in Silicon Valley, California. (SNOW stock)

Source: Sundry Photography / Shutterstock.com

Software platform Snowflake (NYSE:SNOW) serves as a cloud-based data warehouse for customers to store and analyze large amounts of data. The company has been featured in a number of posts on r/WallStreetBets. Some have been bearish while others still overwhelmingly harbor bullish sentiments.

Specifically, Snowflake essentially revolutionized data warehousing, most of which used to be on-premises. It established a cloud network around data storage and charging reasonable prices based on utilization. From 2019 to 2021, Snowflake was able to grow revenue in triple-digit year over year (YOY) growth rates.

These days, unfortunately, Snowflake has definitely hit some roadblocks. Revenue growth rates have plummeted far from their triple digit highs. One culprit includes newfound difficulties in customer acquisition. Another is existing customers attempting to lower their data storage bills by deleting “stale and less valuable” data. Lower than expected product revenue guidance along with the retirement announcement of billionaire CEO Frank Slootman caused the stock to nosedive 20% over a week ago.

Snowflake’s forward P/E multiple remains stretched beyond sanity. Also, further price pressure could be imminent. Therefore, this makes SNOW a stock that r/WallStreetBets posters should pitch from their portfolios.

Hims & Hers Health (HIMS)

The logo for Hims & Hers (HIMS) displayed on a smartphone screen.

Source: Lori Butcher / Shutterstock.com

Covid-19 accelerated the adoption of digital health solutions such as online consultations, remote monitoring, and digital prescriptions. And today, this transformation continues, making digital health stocks appealing to forward-looking investors. That includes those on r/WallStreetBets.

Hims & Hers Health (NYSE:HIMS) has been the subject of a number of bullish posts on the subreddit. This company operates a telehealth platform that globally connects consumers to licensed healthcare professionals, including the U.S. and the U.K. The company offers a range of prescription and non-prescription health and wellness products on both its website and app. Moreover, through the platform, customers can directly order sexual health products from its platform as well.

The stock has rallied more than 57% in 2024, and its valuation is already trading at 35.0 times forward earnings, which could incite selling pressure in the future.

Palantir Technologies (PLTR)

Palantir logo on the smartphone and the company share price on the day of opening the trade October 1, 2020. Palantir valued at $15.8bn in stock market debut. PLTR stock

Source: Ascannio / Shutterstock.com

Palantir Technologies (NYSE:PLTR) provides AI and ML-based data analytics tools for a number of businesses. This includes the defense and intelligence sectors and the healthcare, energy, and finance industries.

In their Q4 report, CEO Alex Karp noted strong demand for its artificial intelligence platform (AIP). The company completed 600 pilot tests in 2023. Nevertheless, the AIP is still very much in its testing phase. So, while growth in pilot tests indicates customer interest, it’s difficult to predict future revenue PLTR will garner.

AI hype has led to Palantir Technologies’ remarkable rally in 2023. Additionally, 2024 has led to a subsequent rise in equity valuation. The data analytics company’s shares have risen more than 52% YTD. As a result, PLTR trades at 80.1x forward earnings. By comparison, Nvidia only trades at 36.1x forward earnings. Therefore, the market may be overvaluing PLTR as an AI company and could likely result in a severe correction.

On the date of publication, Tyrik Torres 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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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