Below we present the list of 5 Best Meme Stocks To Buy Now. For our methodology and a more comprehensive list please see 12 Best Meme Stocks To Buy Now.
5. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Shareholders: 31
Hedge fund ownership of Palantir Technologies Inc. (NYSE:PLTR) has dipped by a little over 20% in the past year, but money managers have generally been bullish on the AI company since it went public in Q3 of 2020. Touk Sinantha’s AltraVue Capital raised its stake in PLTR by 87% in Q1 to 4.84 million shares.
Palantir Technologies Inc. (NYSE:PLTR)’s current growth rates aren’t overly impressive, as revenue grew by 18% year-over-year in Q1 and the company’s guidance for Q2 calls for just 12% growth. With the stock trading around 17x sales in the wake of a big run-up this year, barely being able to crack double-digit sales growth isn’t overly encouraging.
Nonetheless, Palantir Technologies Inc. (NYSE:PLTR) does have some intriguing growth catalysts on the horizon, namely its new large language model AI platform, which CEO Alex Karp recently described as having stronger demand than anything he’s seen at the company in two decades. And unlike many other meme stocks, Palantir is also profitable, earning $0.01 per share in each of the past two quarters.
4. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Shareholders: 33
Retail investors and short sellers have been doing battle over Carvana Co. (NYSE:CVNA) for several quarters now, with short sellers holding the upper hand. CVNA shares have crashed by 94% since the middle of August 2021, driven by a struggling used car market and insolvency fears. Hedge funds have also been bailing on Carvana in recent quarters, with their ownership stakes in the stock having fallen by 49% since early 2021.
The good news for Carvana Co. (NYSE:CVNA) is that the company appears to have avoided disaster and the worst may be behind it, which has led to a resurgence in the stock this year. Used car prices are on the rise again after sinking throughout much of 2022, and the company’s concerted effort to slash costs has paid off, with it forecasting $50 million in adjusted EBITDA for Q2.
After being one of the fund’s top performers for several years, the ClearBridge Mid Cap Growth Strategy sold off Carvana Co. (NYSE:CVNA) late last year, as it revealed in its Q4 2022 investor letter:
“We exited our position in online automotive retailer Carvana Co. (NYSE:CVNA), in the consumer discretionary sector. After being one of the portfolio’s top performers over the last few years, Carvana has struggled due to a cyclical downtrend in used car volumes and prices as well as investor concern about the company’s ability to fund future growth. We felt the combination of growing macro uncertainty combined with weakening fundamentals justified finally closing the position.”
3. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
Number of Hedge Fund Shareholders: 33
Smart money ownership of Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) has nearly tripled since the middle of 2020, when just 12 funds were long PLAY. Scott Ross’ Hill Path Capital has been the company’s biggest bull dating back to the third quarter of 2021, routinely having greater than 10% 13F exposure to the stock.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)’s acquisition of bowling chain Main Event has provided a big boost to the company’s top and bottom lines, with revenue growing by 32% year-over-year in Q1. The company is also bullish on its opportunity to further boost profitability in the coming year by raising game prices and cutting food and beverage costs.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) also believes its stock to be severely undervalued, with CEO Brian Jenkins recently noting that it could double in value once rerated more in line with its peers.
2. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Shareholders: 34
DocuSign, Inc. (NASDAQ:DOCU) has become more popular among retail investors in recent months at the same time it’s seen a notable decrease in institutional ownership. The number of funds long DOCU has fallen by more than 50% since the end of 2020. Phillippe Laffont’s Coatue Management was the firm’s largest shareholder on March 31, owning 4.33 million shares.
DocuSign, Inc. (NASDAQ:DOCU), the market leader in digital document signing, has attracted the interest of retail investors after falling out of favor with the broader market in recent quarters. DocuSign has seen a sharp decline in growth this year compared to its pandemic-fueled heights of 2021, when business operations surged online, driving the need for its e-signature services. It’s also facing growing competition in the space, though it still controls about 70% of the market. For its fiscal 2024, the company expects billings to grow by just 3-4% and revenue to rise by 8%. While the stock is well off its all-time highs, the valuation isn’t overly attractive nonetheless, at 24x forward earnings.
Rowan Street Capital is one of the firms that has sold off DocuSign, Inc. (NASDAQ:DOCU) in recent quarters and explained its decision to do so in the fund’s Q3 2022 investor letter:
“In the case of DocuSign, Inc. (NASDAQ:DOCU), the “Management” part no longer satisfies our requirements in order to remain in our investment portfolio. In the past 6-9 months, the company has had a huge turnover in both employees and upper management. In June of 2021, the board decided to get rid of Dan Springer, who had been a CEO of DocuSign since 2017 and took the company public in 2018. We found this decision strange as we thought that he actually did a great job growing the company over the past 5 years (revenues grew almost 5x from $519 million in 2017 to an estimated $2.4 billion this year).
Dan was faced with a very difficult, unprecedented operating environment just like all the CEOs of SaaS companies. From Q2 ‘20 until Q3 ‘21, during pandemic shutdowns, growth exploded from about 30% to 60%+, as there was a ton of pull-forward demand. The business doubled in about 6 or 7 quarters! As the world opened up after the pandemic, growth slowed quite a bit especially in comparison to these abnormal pandemic quarters. However, on a 3 year CAGR basis, growth was still very healthy (sales grew from $974 million in 2019 to $2.5 billion expected in 2022). They also had to dramatically increase their sales force (biggest expense) to keep up with all this unexpected growth. New employees did not have a chance to be trained properly, but it still worked well as they had demand easily coming to them. Now that there is a very different demand environment, a lot of this salesforce either needs to be retrained for normal sales cycles (land and expand) or be replaced. Employee turnover also compounded with a lot of people who were with a company when stock was going up and up, and now that the stock is down so much from the highs, their stock options are no longer valuable. Having said this, we are not sure any other CEO could have done a better job managing through such a difficult operating environment…” (Click here to read the full text)
1. GitLab Inc. (NASDAQ:GTLB)
Number of Hedge Fund Shareholders: 40
GitLab Inc. (NASDAQ:GTLB) is the most popular meme stock on this list among hedge funds, having boasted strong smart money ownership since it went public in the final quarter of 2021. Several of the company’s largest hedge fund shareholders more than doubled the size of their positions in GTLB during Q1, including Mick Hellman’s HMI Capital, Glen Kacher’s Light Street Capital, and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital.
AI is popular among retail investors, and GitLab Inc. (NASDAQ:GTLB) is increasingly bolstering its own software development program with AI features. The company grew revenue by 45% in the first quarter and sees little direct competition when it comes to the comprehensive suite of software development tools that it provides. GitLab is still losing money, but has substantial cash reserves to fuel its growth and eventually drive it towards profitability.
The Baron Opportunity Fund is bullish on GitLab Inc. (NASDAQ:GTLB)’s ability to gain market share, as discussed in its Q1 2023 investor letter:
“We increased our position in GitLab Inc. (NASDAQ:GTLB) after a sharp pullback in the stock price following its fourth quarter earnings report. GitLab is a software platform that developers, IT professionals, and security teams use to manage all stages of the software development life cycle. While GitLab’s fourth quarter performance was solid, with 58% revenue growth, management issued disappointing 2023 revenue guidance. New customer growth was healthy, but GitLab saw lower expansion rates in its base product as some existing customers cut back on paid licenses to account for layoffs in their businesses, while others slowed purchasing in anticipation of lower developer hiring this year. Management is assuming this trend will continue through the remainder of 2023. Longer term, we believe GitLab can continue to gain share in the $40 billion software developer market because its ability to address all stages of the software life cycle in a single, unified application give it an advantage over point solutions. Shorter term, we see upside to the guidance as: (1) customers continue to upgrade to GitLab’s higher-priced product tier to add security and compliance features; (2) net new customer growth remains healthy; and (3) GitLab is implementing a price increase that should yield an acceleration in revenues toward the end of 2023 and into 2024. The company also continues to demonstrate solid operating leverage. We believe the price increase will help GitLab achieve profitability sooner than initially projected.”
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