This week, retail investors in the US stock market cheered for the emergence of Reddit and Trump Media &amp; Technology Group Corp. (code DJT) under former President Trump's social media company.
After rising more than 16% on its first day of trading, DJT surged another 14% overnight to $66.22, reaching a market value of about $8 billion. It has become the most discussed stock on WallStreetBets, the popular stock trading forum on Reddit, and is among the top 15 stocks by trading volume on Interactive Brokers.
Financial documents show that DJT had only $3.4 million in revenue in the first three quarters of last year, but incurred a loss of $49 million, indicating that the surge is not driven by fundamentals.
Reddit, the fourth largest company by trading volume on Interactive Brokers, went public on the NYSE last Thursday at $34 per share. It opened 38.2% higher on the first day, despite a 11% drop to $58 overnight. The stock price still rose by 70% compared to the IPO price.
Reddit, which has been unprofitable in its nearly 20 years of existence, reported revenue of $808 million in 2023, a year-over-year increase of about 21%. Its net loss narrowed from $158.6 million in 2022 to $90.8 million.
DJT and Reddit's significant gains detached from fundamentals have brought back memories of the GameStop saga on Wall Street, reigniting the meme stock craze.
&#34;Meme stocks,&#34; also known as concept stocks for retail investors, typically defy mainstream financial norms, with price movements disconnected from fundamentals. Retail investors go long on these stocks for speculative purposes and promote them on social media to attract more retail buyers.
According to VandaTrack, retail investors poured a net $6.5 million into DJT on Tuesday, more than three times the previous day's net inflow. Lucas Mantle, data science director at VandaTrack, believes that TMTG and Reddit have the potential to become meme stocks. He stated, &#34;I just need more data on the scale of fund flows to make this judgment.&#34;
Steve Sosnick, Chief Strategist at Interactive Brokers, noted that the market is currently highly driven by momentum, with stock price increases no longer tied to fundamentals but solely to price movements. &#34;Meme stocks&#34; epitomize this mindset
Interactive Brokers' Chief Strategist Steve Sosnick said, &#34;We have seen a lot of capital flows. Our clients are usually attracted to high trading volume, high volatility, and high exposure, so this is not surprising.&#34; Sosnick stated:
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&#34;The difference between 'meme stocks' and ordinary popular stocks lies in the market's passion or frenzy. I think this certainly applies to the case of DJT.&#34;
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RDDT

The "meme stock" craze is back, with both Reddit and DJT stocks soaring significantly due to the enthusiasm of retail investors. Analysts believe that the price movements are mainly driven by market sentiment and fund flows, unrelated to fundamentals

Currently, the favorite stocks of American retail investors: Trump and Reddit