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‘Rewild’ meme stocks are waiting for the market to calm down as they attempt a comeback

(Bloomberg) — Beaten-down meme stocks could make a comeback if solid economic and earnings growth help improve investor sentiment.

This is according to Julian Emanuel of Evercore ISI, who predicted a retail-investment boom in late 2019. The strategist says a strong corporate and economic environment could help revive such stocks this year, if they remain “cooler heads” in the coming weeks, helping ease the mood of gloom in the markets.

There are too many negative emotions to overcome. Many stocks that peaked in the midst of the retail-trading frenzy early last year are well off their highs as concerns mount about the impact of the Federal Reserve’s rate hikes and inflation. Nomura Holdings Inc. And Wolfe Research’s retail favorite gauge has fallen more than 30% from its November highs.

Yet Emanuel sees reason for optimism.

“We look for equities to stabilize,” he wrote in a note on Sunday. “Can the same meme/concept/unprofitable stock now heavily shorted and universally condemned, topping its 2021 win, be prepared to rally?”

Screening for beaten-down stocks with notable levels of low interest Emanuel created a ‘Meme Stock 180’ list of stocks to watch. This includes Teladoc Health Inc., Peloton Interactive Inc., Plug Power Inc. and Novavax Inc.

Still, until sentiment turns, strategists can expect skeptics to point to similar frenzy in history.

“The meme madness was fueled by the same things that drove tulip prices up in the 1640s, shares in the South Sea Company in the 1700s, stock prices in the 1920s, and dot-coms – good old-fashioned FOMO, Or Herb Greenberg of Fear Empire Financial Research said in a note Friday. “When it comes to frenzy, we always think it’s different this time. Spoiler alert: it never happens.”

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