Meme stocks are back as Opendoor skyrockets - but analysts expect rallies to fade

Daily Mail​

6 days ago

This month has seen a resurgence of so-called 'meme stock' trading, as organised groups of retail investors pile into a handful of down-on-their-luck companies.
Meme stocks are unfavoured shares that gain a cult following thanks to social media platforms like Reddit.
Prices are then driven higher, often in response to large short positions built up by hedge funds betting against the companies.
The phenomenon was brought to international attention in 2021 when lockdown-bound retail investors using the subreddit r/WallStreetBets sparked wild price swings in the likes of Gamestop and AMC Entertainment.
Last year saw a revival of retail bets on Gamestop, albeit at less intense trading volumes than three years earlier.
And now the attention of Reddit's vigilante investors is targeted on a handful of new US-listed names, including iconic donut brand Krispy Kreme and GoPro.
Neil Wilson, UK investor strategist at Saxo Markets, said: 'Meme stocks are back - Krispy Kreme, GoPro, Kohl's are now some of the names that are attracting attention.
'These are super volatile. Quantumscape is another - down 7 per cent yesterday and 4 per cent after-hours following earnings.'
But the most attention has been on peer-to-peer residential real estate firm Opendoor Technologies.
What is Opendoor - and why are people investing?
Opendoor allows users to sell it their home directly for cash via its app. It then repairs the purchased homes, and resells them on the open market.
'Sell us your home, we'll renovate and resell it, and you get all the upside,' it says.
The stock had been shorted by many large investors owing to concerns about its fundamentals.
Stockopedia rates the company 15 out of 100 on a 'quality' basis, with Opendoor's operating losses widening from $170million to $322million last year.
Opendoor Technologies shares jumped more than 12 per cent at the US open to $2.60 on Thursday, taking one-month gains to almost 370 per cent.
However, illustrating the high volatility of the last week, the shares have almost halved from Monday's peak of $4.79.
Wild ride: Opendoor Technologies shares are up by almost 370% over the last month
When will the Opendoor rally end?
Lale Akoner, global market analyst at eToro, said recent gains in the stock have been 'driven by speculative momentum, not fundamentals' and she expects reality to set in again at some point soon.
Akoner added: 'The stock surged over 500 per cent in weeks on meme hype, but with persistent losses, thin margins, and exposure to a weak housing market, the underlying business hasn't changed.
'Its explosive rise and sudden reversal is similar to the 2021 meme-stock frenzy, but this part of the cycle lacks the cushion of stimulus checks and zero rates.
'Unlike 2021, the backdrop today includes tighter financial conditions and unresolved trade volatility.
'We therefore think Opendoor trade isn't about fundamentals but FOMO [fear of missing out] chasing short squeezes. As liquidity normalizes and macro risks return to focus, the air will likely come out of this rally.'
Some analysts have attributed the Opendoor rally to X posts last week by EMJ Capital founder and portfolio manager Eric Jackson, who said his hedge fund took a position in the group and projected it would hit $82 in the longer term.
'When I first started tweeting about Opendoor last Monday afternoon, I definitely wasn't thinking it was going to be considered a meme stock,' Jackson said on Wednesday.'