Shares of the health care company Clover Health Investments and fast-food chain Wendy’s have become the latest meme darlings hyped up by online retail investors. On Tuesday, June 8, Wendy’s shares rose suddenly by 16% and Clover Health shot up 55% seemingly out of nowhere.
There are two main reasons for these stocks shooting up: the internet’s favorite shrewdness of apes, Wall Street Bets, and CNBC’s own Jim Cramer.
The start of Wendy’s rally appears to have started with this post by RazKaz-Na where the user lists the reasons why they think this particular is good from increasing expansion, good pandemic recovery earnings, and signs of strong growth. With regards to Clover Health, user neox291 lists out their reasons for backing up the health company by pointing out its plan to expand into other states, high earnings, and the fact that the Democrats are trying to lower medicare eligibility which would bring in more customers.
— Jason Aguiar (@JasonAguiar) June 8, 2021
User Chillznday said in his own post that Wendy’s stock is “the perfect stock for this sub” listing Tendies as a major reason, which refers WSB’s name for stock gains and the fact that Wendy’s sells chicken tenders.
When news broke of Wendy’s and Clover Health being the new meme stock, many assumed that this would be another GameStop incident where the shares of a struggling company are suddenly shot to the moon, but not this case. Unlike GameStop and the other meme stocks, Wall Street actually likes Wendy’s because it’s a solid business that sees a lot of consistent growth, especially now as diners are returning to eat in the restaurant and new menu items come out consistently, like the summer salad.
Wendy’s CEO Todd Penegor is happy seeing the boost from retail investors saying “We’re really excited about where this business can go in the future…”
Things have been pretty good for the new meme stocks as in the past month or so Wendy’s (NASDAQ: WEN) has gone up almost 7% and Clover Health (NASDAQ: CLOV) is up at around 77% at the time of this writing. News has been positive until the morning of June 10 when Bank of America downgraded Clover Health shares from “Neutral” to “Underperform”, i.e. sell these stocks, causing the health company’s stock to drop 15%.
— Jekaterina Drozdovica (@jekaterina_d) June 9, 2021
Bank of America caught wind of the meme rally and company analyst Kevin Fischbeck downgraded the stock saying that while Clover Health “provides value”, “the company’s current growth trajectory does not support the valuation.” Essentially, there is nothing solid or substantial to support this recent surge other than retail investors wanting it to go high.
CNBC stock correspondent Jim Cramer endorses this move saying, “If enough people with enough money start valuing stocks a different way, their new metrics matter too, even if you think they’re absurd” and also stating “I think they’re just getting started”.
But not everyone shares the same sentiment as stock publication Barron’s said in a recent article that “More stocks getting roped into meme madness means traders have more stocks to push around. And volatility can be poison…”