Meme stocks gained massive popularity last year due to their short-squeeze rally. Retail investors' collective bets against short-selling hedge funds had helped these stocks skyrocket.
Social media forums like Reddit’s WallStreetBets gained significant attention worldwide as retail investors spotted the meme stocks by discussing them on these forums. Even though these platforms are known for discussing heavily shorted stocks, they also discuss stocks with sound fundamentals and good growth prospects.
Retail traders are recently back on forums like WallStreetBets to bet against hedge funds. A group of meme stocks tracked by Bloomberg gained 3.7%, extending a six-day rally.
Given this backdrop, it could be wise to invest in fundamentally sound meme stocks Microsoft Corporation (MSFT) and Nokia Oyj (NOK) for solid long-term returns.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company has two segments, Productivity and Business Processes, which offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL); Skype, Outlook.com, OneDrive, and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions. It has traded at an average volume of 29,791,038 over the past three months.
Last month, Oracle Corp and MSFT announced the general availability of Oracle Database Service for Microsoft Azure. This new offering will allow Microsoft Azure customers to easily access and monitor enterprise-grade Oracle Database services in Oracle Cloud Infrastructure (OCI) with a familiar experience.
Users can migrate or build new applications on Azure and then connect to high-performance, high-availability managed Oracle Database services such as Autonomous Database running on OCI.
In June, The Procter & Gamble Company (PG) and MSFT announced a new multiyear collaboration that will leverage the Microsoft Cloud to help create the future of digital manufacturing at P&G.
The two companies will co-innovate to increase and expand P&G's digital manufacturing platform and leverage the Industrial Internet of Things (IIoT) to bring products to consumers quicker, increase customer satisfaction and enrich productivity to reduce costs.
Also, in June, Accenture (ACN) and MSFT, together with their joint venture Avanade, are joining forces to handle climate change, one of the most critical and urgent challenges for both businesses and people.
With an immediate focus on delivering solutions to help organizations change their operations, products, services, and value chains to help increase the transition to net-zero, the three companies will widen their focus to broader environmental, social, and governance (ESG) challenges in the future.
During the fourth quarter ended June 31, 2022, MSFT's total revenue increased 12.4% year-over-year to $51.87 billion. The operating income grew 7.5% from its year-ago value to $20.53 billion, while its net income improved 1.7% from its prior-year quarter to $16.74 billion. The company's EPS rose 2.8% year-over-year to $2.23.
Analysts expect MSFT's revenue to increase 10.1% year-over-year to $49.88 billion for the first quarter ending September 2022. The company's EPS is expected to grow 2.2% year-over-year to $2.32 for the first quarter ending September 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The company's shares have soared 10.2% over the past three months.
MSFT's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Stability and Quality. Within the C-rated Software - Business industry, it is ranked #11 of 54 stocks. To see additional POWR Ratings for Growth, Sentiment, Value, and Momentum for MSFT, click here.
Nokia Oyj (NOK)
NOK provides mobile, fixed, and cloud network solutions worldwide. The company has four operating segments: Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
It offers products and services for radio access networks covering technologies from 2G to 5G and microwave radio links for transport networks. NOK has traded at an average trading volume of 32,929,639 over the past three months.
Last month, NOK extended its partnership with Hill Air Force Base and the National Spectrum Consortium to ensure that incumbent radar and 5G networks can co-exist smoothly in a shared spectrum by controlling the behavior in real-time of the 5G system when the incumbent radar is present.
In June, NOK announced an FTTH deal with all-fiber service provider Wire 3. The Florida-based operator is rolling out a 10Gb/second network along Florida’s Atlantic Coast, including Edgewater and New Smyrna Beach. The deal includes fiber access nodes for the central office, fiber modems for customer homes, service routers, Wi-Fi gateways, and Nokia’s Altiplano broadband network controller.
For the second quarter of fiscal 2022, NOK’s net sales increased 11% year-over-year to €5.87 billion ($6.06 billion). Its operating profit increased 17% year-over-year to €564.00 million ($581.87 million), while the profit grew 31% from its year-ago value to €460.00 million ($474.57 million). The company’s EPS amounted to €0.08, up 33% from its year-ago value.
The consensus EPS estimate of $0.10 for the third quarter ending September 2022 indicates an 8.1% improvement year-over-year. Analysts expect NOK’s revenue to increase 3.1% year-over-year to $5.79 billion for the first quarter ending March 2023. Moreover, it has an impressive earnings history, as it surpassed the consensus EPS estimate in all of the trailing four quarters.
The stock has gained 13% over the past month.
NOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The stock also has an A grade for Value and a B for Sentiment. Within the B-rated Technology - Communication/Networking industry, it is ranked #11 of 53 stocks
In total, we rate NOK on eight different levels. Beyond what we've stated above, we have also given NOK grades for Growth, Stability, Quality, and Momentum. Click here to see more of NOK’s ratings.
MSFT shares were trading at $290.58 per share on Friday afternoon, up $3.56 (+1.24%). Year-to-date, MSFT has declined -13.22%, versus a -9.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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