In 2020 and 2021, so-called Reddit stocks came roaring to life. Investors were increasingly piling into these names in a way that many in the industry knew would end in disaster. Ultimately, it did, with these stocks falling significantly in 2022. However, that does leave us with some cheap Reddit stocks to pick over.
In early 2021, there were some short-squeeze discussions, mostly centered around GameStop (NYSE:GME). Bands of traders convened on Reddit, looking for stocks that had high short-interest readings, to load up on the stock and try to force what’s called a short-squeeze — essentially, forcing short sellers to stem their losses by buying back shares they initially borrowed.
Many of these names became popular Reddit stocks, although that list expanded as more and more investors began looking into investing. As a bear market roils the stock market, let’s revisit some of these names and see if we can’t shake out a couple of cheap Reddit stocks.
|AMD||Advanced Micro Devices||$58.17|
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is not the first name that comes to mind when I think of cheap Reddit stocks. However, upon further inspection, it’s one that certainly warrants a closer look.
First, it’s one of the top Reddit stocks right now, and shares of AMD stock recently hit a new 52-week low. So, while it may not be cheap in the sense of its share price, it sure is cheap based on its valuation. However, there is good news and bad news here.
AMD shares trade at less than 14-times this year’s earnings. That’s darn cheap for a company churning out as much growth as this firm is. But this is where the good news meets the bad news. On Oct. 6, the company released preliminary third-quarter results, with expectations for revenue of roughly $5.6 billion vs. estimates of $6.71 billion.
That miss sent shares to new 52-week lows, with AMD stock now down about 65% from the high. Given its role in the semiconductor space and how far the stock has already sunk, long-term investors may want to pay attention to AMD.
One popular Reddit stock from the 2020-21 bull run was Gogo (NASDAQ:GOGO). This stock went from $10-plus to single digits in the lead-up to the Covid-19 correction, then it slumped all the way down below $2. Investors were leaving this one for dead — and for good reason.
Who was going to pay for wireless internet on planes during a global pandemic? On the surface, the question made sense and the doubt surrounding Gogo were reasonable. However, investors didn’t consider what private jets were doing and the WiFi revenue that was being driven from business aviation.
In fact, the company’s business aviation was a profitable and free cash positive venture. It was Gogo’s commercial aviation product that didn’t do so well. However, the company then sold it in December 2020. Theoretically, even getting zero dollars for the business would have been a positive, but instead, Gogo received $400 million in cash.
Now the company is profitable, growing revenue at a double-digit clip and even trades at a reasonable valuation.
Last but not least we have a Reddit favorite: BlackBerry (NYSE:BB).
In fact, BlackBerry has been a favorite among certain investors for a long time, but the stock has never panned out to be the winner that the bulls had hoped. In that respect, avoiding BlackBerry is a reasonable takeaway for many readers and without question, is the riskiest pick on this list.
That said, BlackBerry is like that pesky stock that just won’t die off. No one has acquired the company, and while there have been positives at times, BlackBerry just never capitalized on its opportunities enough for the stock to break free and run higher.
While the stock had periods of momentum (and ripped higher during short-squeezes), BlackBerry now finds its stock trading at its lowest price since Nov. 2020.
Down in the $6-range, this name has typically found a bid. That observation stretches back all the way to 2012 (although shares did trade at a low of $2.70 during March 2020). It’s now below $5.
While analysts do expect a notable pullback in business this year, 2023 estimates call for a rebound back towards 2021 levels. Admittedly, that’s not the greatest endorsement, but break-even results on $900 million in revenue and (hopefully) positive free cash flow could be enough to send this stock higher — even if it remains below $10.
On the date of publication, Bret Kenwell 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.