Young investors on the online investing application Robinhood can’t stop chasing shares which can be penny-companies with a share cost under $5). As of Monday, Feb. 15, the following five small cap stocks were the held that is many on its platform.
Though we find this mind-boggling, Canadian marijuana stock Sundial Growers (NASDAQ:SNDL) is the third most held stock on Robinhood. More investors have selected to place cash into Sundial than into great companies like Amazon, Microsoft, and Walt Disney.
Because the end of October, Sundial has been mom of most energy stocks, having a gain of 1,350%. The business has cleaned up its stability sheet and increased its money and cash equivalents on hand to about $610 million. In the event that U.S. does choose legalize cannabis during the degree that is federal it would give Sundial a good amount of money to place to function when going into the U.S.
However, we’d opine that investors’ love of Sundial is grossly misplaced. We are speaking about a ongoing company that issued over 1 billion stocks in roughly four months via share offerings and debt-to-equity swaps. Yes, it has an abundance of cash, nonetheless it absolutely trampled existing shareholders to create its war upper body up.
Moreover, Sundial Growers is transitioning from the lower-margin wholesale cannabis model that is operating the one that focuses on higher-margin retail. While I don’t disagree with this particular move, it’s going to include declining product sales which are year-over-year and ongoing losings into the interim.
Possibly just as maddening is telecom equipment provider Nokia (NYSE:NOK), which will be the eighth most held stock on Robinhood (also above Amazon, Microsoft, and Disney).
In current months, retail investors on WSB have actually sunk their teeth in to a range greatly short-sold businesses so that you can effect a squeeze that is brief. A squeeze that is quick designed to send pessimists scurrying for the exit, that may push momentum shares even greater. It caused the Nokia that is highly liquid for few times, giving stocks of this company up over 100%. Nonetheless, Nokia has since quit each of its gains which are reddit-fueled.
The actual fact of the matter is Nokia isn’t an investment possibility that is exciting. Small cap stocks frequently have a decreased share price for a valid reason, and Nokia may be the example that is perfect. As my fellow Fool Leo Sun noted recently, Nokia invested so time that is significantly to backpedal to higher operating margins as a result of its acquisition of Alcatel-Lucent that it forgot to lead with innovation. As a result, its share for the telecom gear market is in the decrease, and it’s falling behind other 5G equipment providers during an essential infrastructure cycle that is upgrade.
The 3rd most penny that is popular on Robinhood, and 13th most held company regarding the entire platform, is clinical-stage veterinary medication and diagnostics developer Zomedica (NYSEMKT:ZOM). Within the trailing 90 days, stocks of Zomedica are up over 2,600%.
Zomedica’s skyrocketing stock can be attributed to two head-scratching catalysts. It first received a boost that is huge mid-January whenever Tiger King celebrity Carole Baskin promoted Zomedica in a video provided online. The organization received a lift that is 2nd retail investors caught onto its momentum. If you should be observing a theme here, it’s that millennials and novice investors love to chase momentum stocks.
There is news that is great Zomedica beyond the fluff. The company plans to launch its point-of-care Truforma system that is diagnostic cats and dogs on March 30. This will provide the business a method to create income that is recurring. In addition closed $173.5 million in bought-deal funding on Feb. 11, that may expel any money concerns.
However, Zomedica is sporting a nearly $2.4 billion valuation and looks not likely to accomplish also $20 million in sales ahead of 2023. Most medication or device developers are happy if they are respected at 5 to 9 times sales that are top. Zomedica is displaying a price-to-sales ratio of over 100 whenever looking 36 months into the future. This valuation doesn’t look sustainable. Young investors on the online investing application Robinhood can’t say there isn’t risk with the app.