The meme stock craze, which began with the unprecedented short squeeze of GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) earlier this year, has entered a new phase, with most meme stocks failing to maintain the price levels they achieved, and retail stock traders targeting fewer names than before. So, we believe investors should stay away from meme stocks Peloton Interactive (NASDAQ:PTON) and Zillow (Z), which lost more than 35% in price last week. Let’s discuss.The meme stock mania commenced earlier this year with the unprecedented short squeeze rally of GameStop Corporation (GME) and AMC Entertainment Holdings (AMC). However, last week, during the Boston Investment Conference, billionaire investor Stanley Druckenmiller rang the bubble alarm and warned that meme stocks and many other assets are overpriced, creating concerns among retail traders.
Furthermore, according to the alternative data provider Quiver Quantitative, the average number of daily comments last month on Reddit’s WallStreetBets forum fell to half of its last year’s number. Also, the number of active users and funded accounts on a few financial platforms that allow investors to invest in stocks saw a dip in the third quarter.
Given this backdrop, we think investors should stay away from fundamentally weak meme stocks, Peloton Interactive, Inc. (PTON) and Zillow Group (NASDAQ:ZG), Inc. (Z), because they declined more than 35% in price last week.