The meme stock mania, which started earlier this year thanks to social-media forums, is gradually fading because most meme stocks don’t possess sufficient financial strength to support their massive price gains. Hence, we believe fundamentally weak meme stocks Robinhood (NASDAQ:HOOD), GameStop (GME), and IronNet (IRNT) are best avoided now. Read on.Meme stocks emerged as a pandemic-induced diversion from traditional investing practices, with the zealous involvement of millennials as retail traders. Several social media forums helped retail traders bet against hedge funds, causing a short squeeze in some fundamentally weak stocks. However, with most meme stocks failing to maintain the price levels they achieved, the meme craze is gradually fading. Another reason for the declining interest in meme stocks is the revival of cryptocurrencies. Retail traders’ attention is shifting toward potentially lucrative opportunities offered by cryptocurrencies. So, while there are still new meme names on social media forums, the most popular candidates in this space are losing focus.
According to the alternative data provider Quiver Quantitative, the average number of daily comments on Reddit’s WallStreetBets forum last month was only half of its last year’s value. Furthermore, 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.
So, we think it could be wise to avoid meme stocks Robinhood Markets , Inc. (HOOD), GameStop Corp . (NYSE:GME), and IronNet, Inc. (IRNT) because of their weak growth prospects and bleak financials.