Meme stocks have regained traction following the GameStop (GME) short squeeze in January this year. Popularized by online community Reddit r/WallStreetBets, meme stocks have been major market movers over the past couple of months, with certain stocks garnering manifold gains. Reddit co-founder Alexis Ohanian described meme stocks as the intersection of community and capital and social media and finance.
However, meme stocks typically gain popularity through social media platform discussions, facilitated by retail investors’ rising interest. These stocks tend to be overlooked and are often sold short by institutional investors and hedge funds.
Most of the meme stocks now look overvalued by traditional measures Palantir Technologies Inc. (PLTR), BlackBerry Limited (BB), and Senseonics Holdings, Inc. (SENS) look highly overvalued at their current price levels given their weak growth prospects. The price targets set by Wall Street analysts for these stocks indicate that they could suffer significant declines in the near term. So, we think these three stocks are now best avoided. Palantir Technologies Inc. (PLTR)
PLTR builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism operations. The Palo Alto, Calif., company operates through two platforms--Palantir Gotham and Palantir Foundry. PLTR went public through direct listing on September 30.
In terms of non-GAAP forward P/E, PLTR is currently trading at 187.48x, which is 591.5% higher than the 27.11x industry average. Its 304.22 forward Price/Cash Flow multiple is 1,213.2% higher than the 23.17 industry average.
PLTR’s revenue increased 48.8% year-over-year to $341.23 million in its fiscal first quarter, ended March 31. However, its loss from operations increased 62.4% from its $114.01 million year-ago value, while its net loss increased 127.5% year-over-year to $123.47 million.
A $379.12 million consensus revenue estimate for the fiscal third quarter, ending September 30, 2021, indicates a 31% improvement from the same period last year. Analysts expect the company’s EPS to come in at $0.03 in the next quarter, indicating a 66.7% decline year-over-year. PLTR has gained 16.3% year-to-date, and 6.8% over the past six months.
Of the eight Wall Street analysts that rated PLTR, two rated it buy, three rated it Hold and three rated it Sell. Their $22 median price target indicates a potential 19.7% downside of 19.7% from its last closing price of $27.38. Their 12-month price targets range from a low of $17.00 to a high of $30.00.
PLTR has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
PLTR has an F for Value, and a D for Stability and Sentiment. It is ranked #11 of 13 stocks in the D-rated Software - SAAS industry.
Beyond what we’ve stated above, we have also rated PLTR for Growth, Momentum, and Quality. Click here to view all PLTR Ratings.
Click here to check out our Software Industry Report for 2021
BlackBerry Limited (BB)
Based in Canada, BB provides security software and services to enterprises and governments. The company leverages artificial intelligence and machine learning to deliver solutions in the areas of cybersecurity, safety, and data privacy, and offers endpoint security management, encryption, and embedded systems.
In terms of forward EV/EBITDA, BB is currently trading at 285.29, which is 1,560.9% higher than the 17.18 industry average. Its 9.33 forward Price/Sales multiple is 128.5% higher than the 4.09 industry average.
BB’s revenue declined 15.5% year-over-year to $174 million in its fiscal first quarter, ended May 31. Its operating loss stood at $58 million, while its net loss and loss per share came in at $62 million and $0.11, respectively.
Analysts expect BB’s revenues to decline 14.6% year-over-year to $785.14 million in the current year. The company’s EPS is expected to remain negative until at least 2023. Moreover, the Street expects the company’s EPS to decline 172.2% in the current year, and at a rate of 21.9% per annum over the next five years. Shares of BB have gained 171.2% over the past year, and 93.1% year-to-date.
Of five Wall Street analysts that rated BB, one rated it Hold while four rated it Sell. Their $9.50 median price target indicates a potential 25.8% downside from its last closing price of $12.80. Their 12-month price targets range from a low of $7.50 to a high of $11.00.
BB has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The stock has a D grade for Stability and Quality, and an F for Sentiment. It is ranked #53 of 55 stocks in the Technology - Communication/Networking industry.
To see additional BB Ratings for Growth, Value, and Momentum, click here.
Senseonics Holdings, Inc. (SENS)
SENS is a medical technology company that commercializes continuous glucose monitoring (CGM) systems. The company's products include Eversense and Eversense XL, which are implantable CGM systems to measure glucose levels. The company also provides devices and apps for real time diabetes monitoring and management. SENS is based in Germantown, Maryland.
On June 3, SENS announced positive results of its PROMISE Study, which evaluated the next generation Eversense CGM System for up to 180 days. However, the system is still awaiting U.S. and European regulatory approval. Thus, it could be a while before SENS is generating profits from the system.
In terms of forward EV/Sales, SENS is currently trading at 120.04, which is 1,535.4% higher than the 7.34 industry average. Its 128.65 forward Price/Sales multiple is 1,461.2% higher than the 8.24 industry average.
SENS’ total revenue increased 7,805.6% year-over-year to $2.85 million in its fiscal first quarter, ended March 31. Its operating loss stood at $11.32 million. Its net loss increased 485.8% year-over-year to $249.51 million, while loss per share rose 223.8% from the prior year quarter to $0.68.
A $13.82 million consensus revenue estimate for the current year indicates a 179.2% increase from last year. However, the company’s EPS is expected to remain negative until at least 2022. Shares of SENS have gained 935% over the past year, and 374.9% year-to-date.
Of the three Wall Street analysts that rated SENS, one rated it Buy while two rated it Hold. Their $3 median price target indicates a potential 27.5% downside from its last closing price of $4.14. Their 12-month price targets range from a low of $2.00 to a high of $4.00.
It is no surprise that SENS has an overall F rating, which equates to Strong Sell in our proprietary POWR Ratings system.
The stock also has an F grade for Value, Sentiment, and Stability. Among the 56 stocks in the D-rated Medical - Diagnostics/Research industry, SENS is ranked #53.
To see additional SENS’ Ratings for Growth, Momentum, and Quality, click here.
Click here to checkout our Healthcare Sector Report for 2021
PLTR shares were trading at $26.57 per share on Tuesday afternoon, down $0.81 (-2.96%). Year-to-date, PLTR has gained 12.82%, versus a 15.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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