Since last year, meme stocks have hit the headlines several times due to their massive, short squeeze-driven returns. Individual investors’ discussion on forums like Reddit’s WallStreetBets (WSB) and their collective bets against short-selling hedge funds have helped these stocks skyrocket in price. Video game retailer GameStop Corporation (GME) is a case in point. Despite possessing weak fundamentals, GME experienced an unprecedented surge in price.
However, meme stocks have experienced a sharp decline from their peak on Feb. 9, 2021. According to the Chief Investment Officer of Personal Capital, Craig Birk, “The speculative frenzy, and just betting on stocks with nothing more than the hope that they’re going to keep us going up, has faded away.”
Given this backdrop, we think it could be wise for investors to continue avoiding popular meme stocks Meta Platforms, Inc. (FB), PayPal Holdings, Inc. (PYPL), and Spotify Technology S.A. (SPOT). These stocks are down more than 25% in price this year and could witness further declines because of their bleak growth prospects.
Meta Platforms, Inc. (FB)
Meta Platforms, which was formerly known as Facebook, Inc., focuses on building products that enable people to connect and share through mobile devices, personal computers, virtual reality headsets, and in-home devices. Its segments include Family of Apps and Facebook Reality Labs. It has had 859 mentions in the WSB over the past 24 hours. FB is headquartered in Menlo Park, Calif.
On Feb. 3, 2022, FB noted in its annual report that “If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs or rely upon other alternative means of data transfers from Europe to the United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.” It added that this “would materially and adversely affect our business, financial condition, and results of operations.”
FB’s income from operations decreased 1.4% year-over-year to $12.58 billion for the fourth quarter, ended December 31, 2021. The company’s operating margin came in at 37%, compared to 46% in the year-ago period. Also, its net income decreased 8.3% year-over-year to $10.28 billion.
Analysts expect FB’s EPS for the quarter ending March 31, 2022, to decrease 21.8% year-over-year to $2.58. The stock has declined 31% in price year-to-date to close the last trading session at $232.
PayPal Holdings, Inc. (PYPL)
PYPL in San Jose, Calif., is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. Its combined payment solutions comprise its payments platform, which includes PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and Hyperwallet products and services. It has been mentioned 36 times in the WSB over the past 24 hours.
On Feb. 2, 2022, PYPL reported that it had closed 4.50 million accounts after finding “bad actors” were taking advantage of its incentives and rewards programs. PYPL also lowered its forecast for new customers after announcing that it no longer expects to achieve 750 million active accounts by 2025.
For its fiscal fourth quarter, ended Dec. 31, 2021, PYPL’s non-GAAP operating margin came in at 21.8%, versus 24.7% in the year-ago period. The company’s operating expenses increased 13.8% year-over-year to $5.86 billion. Also, its net income decreased 48.8% year-over-year to $801 million.
For the quarter ending March 31, 2022, PYPL’s EPS is expected to decline 27.9% year-over-year to $0.88. The stock has declined 34.8%in price year-to-date to close the last trading session at $122.94.
Spotify Technology S.A. (SPOT)
Based in Luxembourg, SPOT provides audio streaming services worldwide. The company operates through Premium and Ad-Supported segments. It has had one mention in the WSB over the past 24 hours.
On Dec. 31, 2021, the SPOT exclusive Joe Rogan Experience podcast featuring guest Dr. Robert Malone spread misinformation on COVID-19. So, on Jan. 26, 2022, artist Neil Young announced that he was removing his music from SPOT, which followed by increasing traffic on SPOT’s cancellation page.
SPOT’s net cash flow from operating activities decreased 3% sequentially to €119 million ($135.97 million). The company’s general and administrative expenses increased 20% sequentially to €126 million ($143.97 million). Also, its net loss came in at €39 million ($44.56 million), compared to €2 million ($2.28 million) in net income in the third quarter, ended Sept. 30, 2021.
Analysts expect SPOT to report a $0.23 loss per share for the quarter ending March 31, 2022. The stock has declined 25% in price year-to-date to close the last trading session at $175.49.
FB shares fell $4.17 (-1.80%) in premarket trading Thursday. Year-to-date, FB has declined -32.36%, versus a -4.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
Continue to Avoid These 3 Meme Stocks Down More Than 25% in 2022 StockNews.com
