Earlier this year, the hype surrounding video game retailer GameStop Corporation (GME) and leading cinema chain AMC Entertainment Holdings, Inc. (AMC) threw a spotlight on Reddit forum r/wallstreetbets and the world of retail investing. The popular subreddit triggered a multi-billion-dollar short squeeze and caused a stir in the financial markets.
Buoyed by the meme stock craze, amateur traders on r/wallstreetbets have catapulted shares of several other stocks, including BlackBerry Limited (BB) and Clover Health Investments Corporation (CLOV). With retail trading surging, r/wallstreetbets now has close to 11 million users. But now that the popular Reddit stocks are running out of steam, some new names are grabbing the spotlight due to their fundamental strength and solid long-term growth prospects.
r/wallstreetbets stocks SoFi Technologies, Inc. (SOFI) and Virgin Galactic Holdings, Inc. (SPCE) have recently attracted some attention from Wall Street because of their considerable growth potential. Consequently, analysts expect these stocks to gain 50% or more in price in the near term.
SoFi Technologies, Inc. (SOFI)
Personal finance company SOFI operates an online platform that provides a suite of financial products. Through both its mobile app and desktop interfaces, the San Francisco company offers home loans, mortgage loans, investments, student loan refinancing, personal loans, and insurance products for renters. In addition, it provides SoFi Weekly Dividend ETF, a weekly dividend payment to shareholders. The company has been receiving growing levels of retail investor attention on the Reddit platform lately.
In June, SOFI introduced a new loan program to ease borrowers’ distress by allowing them to refinance their federal student loans at low-interest rates through the company’s platform without making interest payments until October 2021. Federal borrowers can benefit from this new program amid uncertainty surrounding the government’s temporary pause on student loan repayments.
SOFI’s total revenue rose 101% year-over-year to $231.27 million in the second quarter, ended June 30, 2021, driven by strong growth across three of its business segments. Its lending segment revenues rose 73%, while its financial services segment revenues grew 602%. The company’s adjusted EBITDA amounted to $11.24 million for this quarter, compared to a negative $23.75 million in the prior-year period. SOFI’s loan origination and sales increased 74.3% from the same period last year to $109.72 million. Furthermore, its net cash provided by investing activities stood at $239.34 million, representing a 145.6% increase year-over-year for the six months ended June 30, 2021.
The consensus EPS estimate for its fiscal year 2022 represents a 79.6% improvement year-over-year. Meanwhile, the $1.47 billion consensus revenue estimate for the next year indicates a 51.3% increase year-over-year.
Two Wall Street analysts have provided ratings for the stock, and both have rated it Buy. Closing yesterday’s trading session at $14.22, the $26.50 consensus price target represents a potential 86.4% upside. The average price target ranges from a low of $23 to a high of $30.
Virgin Galactic Holdings, Inc. (SPCE)
Vertically integrated aerospace company SPCE manufactures space vehicles and develops human spaceflight for private individuals and researchers in the United States. Its spaceship operations include flying commercial research and commercial human spaceflight. In addition, SPCE is developing commercial spacecraft and intends to provide suborbital space flights to space tourists. SPCE is based in Las Cruces, N. Mex.
While GME and AMC led the retail buying wave earlier this year, the new speculative paradigm has now shifted to space tourism company SPCE, which is well-positioned to cash in on the meme stock frenzy.
In July, SPCE’s VSS Unity successfully completed the company’s fourth rocket-powered spaceflight. With a full crew in the cabin, the landmark achievement marked a historic moment for the company and the space industry.
In June, the company signed a contract to fly the International Institute for Astronautical Sciences researcher Kellie Gerardi on a research flight to conduct experiments and develop new healthcare technologies. This will enable SPCE to maximize the science and technology advancements in its spaceflight systems.
In the second quarter, ended June 30, 2021, SPCE reported $571,000 in revenue and a $508 million gross profit. The company’s cash and cash equivalents totaled $552 million. In addition, its research and development expenses declined 3% year-over-year to $35.90 million.
Analysts expect SPCE’s revenue for its fiscal year 2021 to be $2.3 million, representing an 866.4% year-over-year growth. Its revenue is estimated to increase 2,074.8% next year. The consensus EPS estimate for the next quarter, ending September 2021, represents a 20.6% year-over-year increase. The stock has gained 38.9% in price over the past year and 51.7% over the past three months.
Among 11 analysts that rated the stock, three have rated it a Buy. The stock’s $38.44 median price target represents a 52.2% increase from its $25.25 last closing price.
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SOFI shares were trading at $13.98 per share on Thursday morning, down $0.24 (-1.69%). Year-to-date, SOFI has gained 12.38%, versus a 18.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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