To say that things have been interesting on Wall Street over the past three and a half weeks would be an understatement.
Following a year of historic volatility, 2021 is attempting to one-up its predecessor, with retail investors to blame. The recent battle between…
retail investors on the Reddit-based WallStreetBets forum and institutional money managers in heavily shorted stocks and/or companies with penny stock-level share prices has whipsawed more than a dozen momentum stocks.
Sundial Growers and Zomedica are on fire, but they’ll likely implode
As of last week, Canadian marijuana stock Sundial Growers (NASDAQ:SNDL) and clinical-stage veterinary drug and device company Zomedica (NYSEMKT:ZOM) were arguably the two hottest stocks on Wall Street. Over the trailing month, shares of Sundial and Zomedica are up a respective 184% and 175%. For context, the benchmark S&P 500 has gained 3.6% in the same span.
Though Sundial and Zomedica have seen a rise in short interest of late, their penny stock share price (i.e., under $5) looks to be the reason retail investors have flocked to these stocks. Unfortunately, both companies offer very little from a fundamental perspective, which makes their big gains highly suspect.
Sundial Growers has undertaken a number of share issuances and debt-to-equity swaps since the end of September, resulting in an increase of over 1 billion outstanding shares. Aside from its highly dilutive activity, Sundial is in the midst of a business transition from the wholesale side of the cannabis business to retail. This shift won’t happen overnight, and it promises to yield ongoing operating losses in the meantime.
Meanwhile, Zomedica is readying to launch its point-of-care Truforma diagnostic system for cats and dogs on March 30. That’s great news. However, it’s not going to rocket out of the gate like pharmaceutical products are known to do. Wall Street isn’t expecting Zomedica to top $20 million in sales until 2023. That’s a bit unnerving for a company sporting a nearly $2.2 billion valuation.
These are the unstoppable stocks you should be buying
My suggestion is simple: Forget penny stocks like Sundial and Zomedica and buy unstoppable stocks that offer tangible and sustainable growth. The following three companies perfectly fit the bill.
First up is a company that I imagine most readers are going to be familiar with: Facebook (NASDAQ:FB). Although the company has taken heat for the way it’s monitored hate speech on its platform, it remains the most dominant force in the social media space.
Late last month, Facebook lifted the hood on its full-year results for 2020. In one of the most challenging years in decades for the U.S. and global economy, the company generated 21% ad revenue growth and finished with 2.8 billion monthly active users to its namesake website. If you include Facebook’s other owned assets (WhatsApp and Instagram), its monthly active user count grew to 3.3 billion. These are insane figures that demonstrate the breadth of the platforms’ popularity and make it the clear go-to for advertisers looking to reach a broad or highly targeted audience.
What I’ve long said about Facebook that makes it such a growth rock-star is that it’s still not fully monetizing its assets. The $84.2 billion in ad revenue generated in 2020 was almost entirely derived from Facebook and Instagram. Both WhatsApp and Facebook Messenger have yet to be significantly monetized. When the company does open the floodgates on these platforms, Facebook can expect an absolute surge in its operating cash flow.
With four of the six most-visited social destinations, Facebook has an absolute stranglehold on the social media space. That makes it a…
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