Back in the analog days, boiler rooms cold called everyone from the neighbor across the street to a grandmother scraping by on a meager pension, all to pump publicly traded securities that had little chance of succeeding — except for those that got in early. Today, social media platforms like Discord do away with high-pressure sales tactics. But are so-called Discord stocks worth your while?
For those that followed the phenomenon of meme trades through Reddit, the answer is a resounding yes. Thanks to introducing the concept of short squeezes to the hungry masses, several down-and-out names have inexplicably rebounded. But now that Wall Street and regulatory agencies like the Securities and Exchange Commission are sniffing out popular message boards, Discord stocks could enjoy a cynical renaissance.
As InvestorPlace markets analyst Thomas Yeung, CFA, pointed out, Reddit’s “r/WallStreetBets was once a decent place to start. The heavily moderated message board, however, has lost some of that shine as regulatory scrutiny has stepped up. Only a handful of trusted users can now speak freely without fear of their posts getting taken down.” But as Yeung stated, the rise of Discord stocks are “mostly hidden from Wall Street’s (and the SEC’s) prying eyes.”
Since Discord is basically what r/WallStreetBets was before the whole meme-trading saga dominated headlines, you can find a diversity of market ideas. Just to be clear, diversity of opinion alone does not mean that every or even any pick is going to be profitable. Prospective participants should know that in July, stock trading on margin finally declined month-over-month, which may suggest a waning of speculative fervor that earlier drove Discord stocks.
However, if you’re coming down with a case of fear of missing out (FOMO), then perhaps this social media platform might provide some ideas for you. But be careful, don’t jump into these Discord stocks without extreme due diligence.
To clarify the point of this write-up, this is neither a position of buying or selling the Discord stocks mentioned above but rather providing information on what’s currently popular. Still, as Yeung wisely remarked, “what I write today will become stale within 10 minutes of publication.” Some of these speculative ideas may have a longer lifespan but again, due diligence is your friend.
ContextLogic (NASDAQ:WISH) China Pharma Holdings (NYSEAMERICAN:CPHI) Gold Resource (NYSEAMERICAN:GORO) NeoPhotonics (NYSE:NPTN) LivexLive Media (NASDAQ:LIVX) LM Funding America (NASDAQ:LMFA) Flora Growth (NASDAQ:FLGC)
Discord Stocks Looking for a Boost: ContextLogic (WISH) Source: sdx15 / Shutterstock.com
Perusing the blogosphere, one of our competitor sites asked, why is everyone talking about ContextLogic? Well, it’s probably the same reason why people love buying junk cryptocurrencies or why dogs chase cars they have no intention of driving. Sometimes, we want what we want, whether it follows a particular logic or not.
That said, ContextLogic does offer some fundamental justification. Billed as a “one of the largest and fastest growing global ecommerce platforms” according to its website, ContextLogic matches “value-conscious consumers” with over “half a million merchants around the world.” On the surface, the narrative sounds compelling because of the integration of online sales in everyday purchases.
Factor in the disruption and lockdowns associated with the novel coronavirus pandemic and you can see why WISH has been one of the most popular Discord stocks. Even now, with shares taking a beating, they attract the buy-the-dip folks.
Unfortunately, the company’s latest financial disclosure revealed that marketplace revenue “plunged 29% from a year earlier as users shopped elsewhere.” That’s a particularly tough blow as ContextLogic essentially received free marketing during the lockdowns. Apparently, that wasn’t enough although if you’re a cup-half-empty type, WISH stock is discounted 30% over the trailing month.
China Pharma Holdings (CPHI) Source: luchschenF / Shutterstock.com
Before I get into this next company on our list of Discord stocks, let me start with a firm disclosure: I am not going to touch China Pharma Holdings with a ten-foot pole. That’s not to say that I’m bearish on CPHI or anything of that nature. I just don’t have the nerves of steel required to put my money at risk.
Nevertheless, China Pharma popped up again among Discord stocks and it likely has to do with the ongoing Covid-19 pandemic. As InvestorPlace editor Sarah Smith pointed out in October 2020, the company has an “expansive pharmaceutical and biotech business within China.” Critically, it also has a subsidiary which focuses on manufacturing face masks.
Of course, with the delta variant spreading throughout the globe, face masks might continue to carry relevance. And as if we needed more ominous news, Reuters reported that the lambda variant “shows vaccine resistance in lab.” If so, personal protective equipment may once again be part of everyday life.
Still, this is a very narrow play on Covid, which may be why shares have cratered over the last several days.
Discord Stocks Looking for a Boost: Gold Resource (GORO) Source: allstars / Shutterstock.com
Whenever you’re dealing with online investment forums, you’ll find plenty of advocates of precious metals. For full disclosure, I think it’s wise for investors to have a small portion (I’d say no more than 5% to start) of their asset base in physical precious metals.
That way, should a nuclear apocalypse erupt and electromagnetic pulse attacks render the internet useless, you can still shop at your local grocery store with silver rounds (which may be worth $500,000 per ounce following hyperinflation of the dollar). And if none of these terrible things happen, you can rely on the metals’ intrinsic value.
Therefore, it wasn’t too surprising that Gold Resource made the rounds of popular Discord stocks. However, this may be a case where outside observers test how much pain dip-buyers can endure. From the close of Aug. 17, the trailing month has witnessed a 40% decline in the GORO stock price.
Could it be a once-in-a-lifetime opportunity based on inflation concerns? Maybe. But right now, a multi-decade low money velocity suggests that we’re actually encountering deflationary pressures. While precious metals may eventually rise due to the fear trade, it’s safe to say that GORO is best left for extreme speculators.
NeoPhotonics (NPTN) Source: NicoElNino / Shutterstock.com
Shares of NeoPhotonics, a communications technology firm, have sparked interest among Discord users due to their heavily discounted price and their potential for another move higher. Over the trailing six months, NPTN has shed 29%, which is a staggering loss to be sure. However, a return to this year’s closing high of $13.78 would net a very handsome profit.
Fundamentally, the narrative isn’t without justification. From its website, NeoPhotonics designs and manufactures “advanced hybrid photonic integrated optoelectronic devices for ultra-fast communications networks.” Such technologies serve cloud computing operations and hyper-scale data center internet content providers and telecom networks.
For context, Gartner predicts that global end-user spending on public cloud services will reach $332.3 billion by the end of this year, up from $270 billion in 2020. Further, Gartner notes that innovations such as containerization, virtualization and edge computing have gained tremendous relevance in light of the pandemic.
I think where investors are getting skeptical with NPTN is that the company has generated disappointing revenue figures relative to their year-ago comparisons. If anything, interest in digitalization should have increased favorably for NeoPhotonics. Still, it may be an interesting wager among Discord stocks once the volatility dies down.
Discord Stocks Looking for a Boost: LivexLive Media (LIVX) Source: Postmodern Studio / Shutterstock.com
One of the contextually intriguing Discord stocks, LivexLive Media markets itself as “the world’s first all-in-one music & entertainment destination that combines premium livestreams of concerts and festivals, expertly-curated streaming radio stations, podcasts, and original artist video and audio content.”
Following the March doldrums of last year, many contrarians saw a huge opportunity with LIVX stock. As the underlying company stated on its website, the platform “gives fans a front row seat to their favorite artists’ shows.” Since inception, LivexLive has streamed live performances from more than 1,800 artists across all genres.
Sure enough, LIVX stock has ebbed and flowed with coronavirus infections, which makes this somewhat of a cynical play. If you anticipate further disruptions from the Covid-19 pandemic, whether that be the delta variant or the lambda variant, there’s at least modest justification for believing shares will move higher.
On the other hand, Americans in particular have proven nothing will get in the way of fulfilling their entertainment needs. Therefore, LIVX’s live-streaming angle could face some pressure as pent-up demand favors in-person concert attendance.
LM Funding America (LMFA) Source: Shutterstock
If you’ve ever wanted to be a goodfella but were afraid of, you know, the legal consequences, you can partially live out your mobster fantasies with LM Funding America. Typical American euphemism, LM Funding specializes in debt collection services.
According to its corporate profile, the company “provides funding to nonprofit community associations (Associations) primarily located in the state of Florida, as well as in the states of Washington, Colorado and Illinois. The company offers funding to Associations by purchasing a certain portion of the associations’ rights to delinquent accounts that are selected by the Associations arising from unpaid Association assessments.”
Apparently, LM Funding has happy clients as well, with one testimonial declaring that the firm “deals with delinquencies and the attorneys so I don’t have to.” Likely, more positive reviews are on the way as LM enjoys two catalysts.
First, as the Washington Post detailed, your neighbors’ delinquencies can ruin your own efforts to sell your condo. Thus, everyone has a shared incentive to resolve these matters. Second, the economic pressures associated with the pandemic may see a rise in financial shortfalls for associations, thereby making LMFA one of the most relevant Discord stocks.
Discord Stocks Looking for a Boost: Flora Growth (FLGC) Source: Bukhta Yurii / Shutterstock.com
Botanical investments attract younger investors. I’m not sure why, it’s just the way that it is. But irrespective of the underlying personal reasons for bullishness, the political backdrop has certainly improved for the “agricultural” industry. According to a Pew Research Center report, two-thirds of Americans support marijuana legalization, which is basically a flipping of the narrative from two decades ago.
Therefore, it’s no surprise that Flora Growth garnered much attention in the arena of Discord stocks. Specializing in high-quality organic oils, infused food and beverages and pharmaceutical-grade derivatives of a plant whose identity can be revealed by subtracting 100 from the number 520.
Forgive me but I’m trying to keep this article on the algorithm’s safe list.
While an intriguing opportunity, the main challenge facing FLGC stock is that horticulture if you will is a tough business. True, the company has an international distribution footprint, which broadens Flora’s appeal. At the same time, FLGC is a narrative-driven investment as the company is a pre-revenue firm.
There might be an outside chance that shares bounce higher as traders milk the speculative opportunity for one last go. However, only participate with money you can comfortably afford to lose, if you’re going to participate at all.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.