With the meme stock craze showing no sign of fading, two recent additions—Clover Health (CLOV) and Wendy’s (WEN)—saw their share prices spike to crazy highs last week. However, given the increased volatility of meme stocks, investors are increasingly unsure how long their momentum could last. As such, we think it’s best to bet on names that possess strong financials and business models to help sustain their rallies. So, with that in mind, let’s evaluate which of these two stocks is a better buy now.As the Reddit-fueled meme stock mania intensifies, it seems that retail traders have now shifted their focus from AMC Entertainment Holdings (NYSE:AMC) and GameStop Corporation (NYSE:GME) to several new names that include Clover Health Investments, Corp. (CLOV) and The Wendy's Company (NASDAQ:WEN). The price of healthcare company CLOV’s stock jumped a staggering 109% on June 8 as amateur traders on social media platforms continued to drive rallies in heavily shorted U.S. stocks. Similarly, WEN’s shares surged nearly 26% to record highs on the same day after subreddit r/wallstreetbets forum’s post pitched the fast-food-joint as “the perfect stock” because of its signature products and “effective” social media presence.
However, CLOV’s shares have crashed into negative territory. The stock has lost 37.8% over the past five days. This reflects that the gains were not a result of financial performance and fundamentals, but merely social media attention. In contrast, WEN has been witnessing strong digital and store sales, and increasing demand for its premium food items. Since the company is both fundamentally and financially sound, it could continue to see solid gains going forward.
While CLOV has gained 84.3% over the past month, WEN has returned 1.4%. In terms of past three months’ performance, CLOV is the clear winner with 55.2% gains versus WEN’s 10.2% returns. But which of these stocks is a better pick now? Let’s find out.