The online retail trading community shook the financial world last year when the online Reddit community r/wallstreetbets had sent Gamestop (GME) to unprecedented heights. But the gains could not last and ended up inflicting a painful squeeze on short-selling hedge funds.
The term ‘meme stock’ has become conventional, and even meme coins, such as the Dogecoin in the cryptocurrency world, have popped up. However, according to JPMorgan Chase & Co. (JPM), retail investors are ditching risky trading options in favor of more traditional equity funds.
Beyond the speculative frenzy, we believe the Reddit trending stocks Microsoft Corporation (MSFT), Moderna, Inc. (MRNA), ON Semiconductor Corporation (ON), The Chemours Company (CC), and MSC Industrial Direct Co., Inc. (MSM) might be worth a buy, given their solid fundamentals.
Microsoft Corporation (MSFT)
MSFT is a software behemoth providing software services, solutions, and devices worldwide. The company sells its products through distributors, OEMs, resellers, or digital marketplaces. It has a more than $2 trillion market capitalization.
On February 1, Striim, an enterprise-grade data integration, and streaming solution platform announced the expansion of its strategic relationship with MSFT Azure for accelerating the data modernization journey to Azure. Rohan Kumar, Corporate Vice President, Azure Data at MSFT, said, “We are pleased to work with Striim to provide our customers with a fast way to replicate their data to the Azure platform and gain mission-critical insights into data from across the organization.”
On January 24, MSFT and FedEx Corp. (FDX) announced the next solution as a part of their multi-year agreement for transforming commerce, supply chains, and logistics. This might stand to benefit the company.
On January 18, MSFT declared its plans to acquire Activision Blizzard Inc. (ATVI), a game development and interactive entertainment company, for an all-cash transaction valued at $68.7 billion. The acquisition is expected to accelerate the growth of MSFT’s gaming business across different mediums and provide the building blocks of the ‘metaverse.’
For the fiscal second quarter ended December 31, MSFT’s total revenue increased 20.1% year-over-year to $51.73 billion. Operating income increased 24.3% from the prior-year quarter to $22.25 billion. Net income and EPS stood at $18.77 billion and $2.48, registering an increase of 21.4% and 22.2% year-over-year, respectively.
Analysts expect MSFT’s EPS to improve 8.8% year-over-year to $2.36 for the fiscal quarter ending June 2022, while Street revenue estimate of $52.96 billion for the same period indicates a rise of 14.7% from the prior-year period. In addition, MSFT has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
MSFT’s stock has gained 22.7% over the past year to close yesterday’s trading session at $287.72.
MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MSFT has a Sentiment grade of A and a Stability and Quality grade of B. In the 164-stock Software – Application industry, it is ranked #17. Click here to see the additional POWR Ratings for MSFT (Growth, Value, and Momentum).
Moderna, Inc. (MRNA)
MRNA operates as a biotechnology company that develops and sells vaccines for infectious, auto-immune, immuno-oncology, cardiovascular, and other rare diseases based on messenger RNA biotechnology.
On February 23, MRNA and Thermo Fisher Scientific Inc. (TMO) announced a 15-year strategic collaboration agreement for enabling dedicated large-scale manufacturing in the U.S. of Spikevax®, MRNA’s COVID-19 vaccine, and other investigational mRNA medicines in its pipeline. This should bolster MRNA’s platform and pipeline.
On February 22, MRNA announced a distribution service agreement with private Latin American pharmaceutical company Adium Pharma S.A. The agreement should support the commercialization of MRNA’s COVID-19 vaccine, Spikevax, across Latin America. This should expand the company’s global commercial footprint.
MRNA’s total revenue increased 3,065% year-over-year to $4.97 billion in the fiscal third quarter ended September 30. Net income and EPS came in at $3.33 billion and $7.70, respectively, up substantially from their negative year-ago values.
The consensus EPS estimate of $8.28 for the quarter ending March 2022 indicates a 191.5% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $7.24 billion reflects an improvement of 273.7% from the same period the prior year.
The stock has declined 0.5% intraday to close yesterday’s trading session at $144.97.
It’s no surprise that MRNA has an overall B rating, which translates to Buy in our POWR Ratings system.
MRNA has an A grade for Quality and a B grade for Growth and Value. It is ranked #18 out of the 443 stocks in the Biotech industry. To see the additional POWR Ratings for Momentum, Stability, and Sentiment for MRNA, click here.
ON Semiconductor Corporation (ON)
ON is a global provider of power and sensing technologies. The company operates through the three broad segments of Power Solutions Group; Advanced Solutions Group; and Intelligent Sensing Group. Its offerings include metal oxide semiconductor field-effect transistors (MOSFET).
On November 4, SensiML™ Corporation, a QuickLogic Corporation (QUIK) subsidiary, announced that it has teamed up with ON for providing machine learning solutions pertaining to autonomous sensor data processing and predictive modeling. The company might stand to benefit from this collaboration.
On November 1, ON announced that it had completed its silicon carbide (SiC) producer GT Advanced Technologies (GTAT) acquisition. The acquisition is expected to boost the company’s SiC technology capabilities.
For the fiscal fourth quarter ended December 31, ON’s revenue increased 27.6% year-over-year to $1.85 billion. Non-GAAP net income attributable to ON and non-GAAP EPS came in at $478 million and $1.09, up 224.9% and 211.4% from the prior-year quarter, respectively.
Street EPS estimate of $1.04 for the quarter ending March 2022 indicates a 197.1% year-over-year rise. Likewise, Street revenue estimate for the same period of $1.90 billion reflects an improvement of 28.3% from the same period the prior year. Additionally, ON has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 44.5% over the past year and 40.8% over the past six months to close yesterday’s trading session at $58.44.
This promising outlook is reflected in ON’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
ON has a Growth grade of A and a Value grade of B. In the 97-stock Semiconductor & Wireless Chip industry, it is ranked #32. The industry is rated B. Click here to see the additional POWR Ratings for ON (Momentum, Stability, Sentiment, and Quality).
The Chemours Company (CC)
CC operates as a performance chemical provider in several regions. The company operates through Titanium Technologies; Thermal & Specialized Solutions; Advanced Performance Materials; and Chemical Solutions segments.
On February 9, CC declared a quarterly dividend of $0.25 per share on the company’s common stock for the first fiscal quarter of 2022. The dividend is payable to shareholders on March 15 and reflects upon the company’s ability in cash generation.
On December 1, CC announced that it had completed the sale of its Mining Solutions business to Draslovka Holding a.s., a Czech private company specialized in cyanide production. The company expects the deal to bolster its transformational strategies and support the growth of its three principal businesses, thereby supporting long-term shareholder value creation.
CC’s total net sales increased 17.8% year-over-year to $1.58 billion in the fiscal fourth quarter ended December 31. Adjusted net income and adjusted EPS improved 31.1% and 32.8% from the same period the prior year to $135 million and $0.81, respectively. Adjusted EBITDA rose 24.8% from the prior-year quarter to $307 million.
Analysts expect CC’s EPS to increase 25.4% year-over-year to $0.89 for the quarter ending March 2022, while Street expects revenue for the same period to rise 10.6% from the prior-year period to $1.55 billion. Additionally, CC has beaten consensus EPS estimates in three out of the trailing four quarters.
Over the past year, CC’s stock has gained 12.5% to close yesterday’s trading session at $28.61.
CC has an overall rating of B, which translates to Buy in our POWR Rating system. The stock has a Value grade of A and a Quality grade of B. It is ranked #19 out of 90 stocks in the Chemicals industry. The industry is rated A. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for CC.
MSC Industrial Direct Co., Inc. (MSM)
MSM operates as a metalworking distribution and a maintenance, repair, and operations (MRO) products and services provider in the United States, Mexico, Canada, and the United Kingdom. The company serves individual machine shops, Fortune 100 manufacturing companies, and government agencies.
On December 15, MSM declared a dividend of $0.75 per share, which was payable to shareholders on January 25, 2022. This reflects upon the company’s ability to pay back its shareholders.
On November 17, the University of Tennessee, Knoxville (UTK) and MSM announced a public-private research partnership to advance machining across the country. About this partnership, Jamie Goettler, Sr. Director, Metalworking Sales & Innovation for MSM, stated, “Pairing our metalworking specialists with forward-looking faculty researchers, as well as students at UTK’s College of Engineering will help us continue to drive innovation to advance manufacturing in the Southeast and across the United States.”
For the fiscal first quarter ended November 27, MSM’s net sales increased 9.9% year-over-year to $848.55 million. Non-GAAP net income attributable to MSM rose 13.1% from the prior-year period to $70.02 million, while non-GAAP net income per common share stood at $1.25, up 12.6% from the same period the prior year.
The consensus EPS estimate for the fiscal year 2022 of $5.75 reflects an improvement of 19.5% from the prior year. Likewise, the consensus revenue estimate for the same period of $3.59 billion indicates a 10.8% year-over-year increase. MSM has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has declined 0.6% intraday to close yesterday’s trading session at $78.36.
MSM has an overall B rating, equating to Buy in our proprietary rating system. It has a B grade for Growth, Momentum, and Quality. In the 92-stock Industrial – Equipment industry, it is ranked #16.
In addition to the POWR Rating grades we’ve stated above, one can see MSM ratings for Value, Stability, and Sentiment here.
MSFT shares were trading at $280.55 per share on Wednesday afternoon, down $7.17 (-2.49%). Year-to-date, MSFT has declined -16.41%, versus a -11.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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