Meme stocks have become a popular and controversial topic in the world of investing. Often associated with struggling companies, they gain sudden, massive popularity due to social media hype, online forums and a shared sense of rebellion against traditional Wall Street institutions. Despite the inherent risks involved, undervalued meme stocks offer potential for significant gains for investors willing to take a gamble.
The rise of meme stocks can be attributed to various factors. In some cases, investors rally behind these stocks as a form of ideological opposition to hedge funds and short-sellers. They see it as an opportunity to challenge the perceived manipulation of the market by these powerful entities. However, more commonly, the driving force behind meme stock surges is the fear of missing out (FOMO) among retail traders. As social media buzz and online forums fuel the hype surrounding a particular stock, many investors jump on the bandwagon.
Now, let’s explore three of the most undervalued meme stocks for investors to consider buying in May.
Coinbase (COIN)
As a major cryptocurrency exchange, Coinbase (NASDAQ:COIN) has experienced fluctuations in stock price. But it remains a key player in the digital currency exchange market. Its revenue is generated through various services including an NFT marketplace and crypto-backed debit cards.
Additionally, COIN reported a significant rebound in its recent quarterly earnings. Earnings per share (EPS) of $1.04 surpassed the analysts’ expectations by a substantial margin. The previous consensus estimate predicted a loss of $0.09 per share. Revenue for the quarter was $953.8 million, which also exceeded expectations by a notable amount. This performance represents a 51.6% increase in revenue compared to the same quarter last year.
COIN is one of my top undervalued meme stocks for this year as Bitcoin (BTC-USD) continues its wild ride, oscillating in the $64,000 range. The extra volatility may lead to increased trading fees and other sources of revenue from traders taking advantage of the recent BTC event.
Therefore, BTC could have a blowout year in 2024, translating into great gains for COIN too.
Micron Technology (MU)
Specializing in memory and storage solutions, Micron Technology (NASDAQ:MU) has shown strong market performance and is seen as undervalued by some market participants.
In the first quarter of fiscal 2024, MU reported revenue of $4.73 billion, marking a significant increase from $4.01 billion in the previous quarter. Despite these gains, the company recorded a GAAP net loss of $1.23 billion.
Looking ahead, MU has provided a revenue guidance range of $5.1 billion to $5.4 billion for Q2 of 2024, surpassing current analyst estimates. And, the company anticipates a gross margin of around 13%. Also, it expects operating expenses to range between $935 million and $965 million for the quarter.
Where I feel MU is undervalued comes own to analyst growth projections. Specifically, its EPS is set to leap an incredible 805.41% in fiscal year 2025. This is the consensus of 38 analysts.
Although such a massive EPS increase may not eventuate in such a short time period, it points to a consensus. That would be that MU is clearly on a profitable trajectory, thus making it undervalued to its earnings growth potential.
Netflix (NFLX)
As a leading streaming service, Netflix (NASDAQ:NFLX) has a significant presence in the entertainment industry and has been part of the broader meme stock conversation due to its popularity and market movements.
Recently, Netflix has shown a strong financial performance, with its latest quarterly earnings surpassing analysts’ expectations. The company reported EPS of $5.28, well above the consensus estimate of $4.51. Revenue for the quarter was $9.37 billion, also exceeding expectations.
Additionally, NFLX continues to focus on enhancing its platform through investments in diverse content and technological advancements. This includes ramping up its advertising business and optimizing content spending.
I think that the best is yet to come for NFLX. It has managed to navigate some problematic issues around password sharing and optimizing its revenue and earnings growth through its unique advertising model. Thus, it’s one of those undervalued memes stocks to buy.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.