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The Orthocell Ltd (ASX: OCC) share price is climbing today. At the time of writing, it’s at 57.5 cents, up by 1.77%, settling back after jumping 4% in early trading.

Let’s have a look at the latest announcement from the regenerative medicine company.

What announcement did Orthocell make?

The Orthocell share price is moving higher after the company announced China and New Zealand have granted patents for its CelGro collagen medical device platform.

Australia and Japan have already granted patents for CelGro. Orthocell also said its patent applications were progressing in the United States and the European Union.

CelGro is a suture-less repair process used to regenerate soft tissue, meaning no potentially damaging stitches are needed. According to the statement, the process can improve the outcomes of surgeries by reducing surgery time, simplifying the techniques, and lessening the risk of additional trauma caused by stitches.

Orthocell reported preclinical studies indicate CelGro provides improved nerve repair and return of muscle function in patients with severed peripheral nerves compared to using sutures.

Orthocell’s managing director, Paul Anderson, commented on the new patents:

These patents are an important addition to our global intellectual property portfolio, further strengthening our position in regenerative medicine product development and novel surgical techniques for soft tissue repair.

Sutureless or tensionless repair is of particular importance in the optimal repair of damaged nerves and is a key part of the repair process undertaken in the CelGro nerve regeneration clinical study. This comes at a perfect time for the company as we move our exciting pipeline products in nerve, tendon and ligament repair through the registration process in the US, EU and AUS.

The CelGro patents are set to expire on 12 October 2035.

Orthocell share price snapshot

Orthocell is currently trading at 57.5 cents per share. That puts Orthocell shares up by 64% over the past 12 months, well surpassing the 27% gains posted by the All Ordinaries Index (ASX: XAO).

Year-to-date, the Orthocell share price has continued to outperform, up 26% so far in 2021.

The post Here’s why the Orthocell (ASX:OCC) share price is on the move today appeared first on The Motley Fool Australia.

More reading

• 2 excellent ASX healthcare shares named as buys
• Why Tesla’s restaurant plan is an unprofitable detour
• The Vulcan Energy (ASX:VUL) share price is rising today
• Are Telstra (ASX:TLS) shares still cheap today?
• ASX 200 up 0.35%: SEEK upgraded, Afterpay lower

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re interested in gaining some exposure to the healthcare sector, then you might want to read on.

Listed below are two ASX healthcare shares that have been given buy ratings. Here’s what you need to know:

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health Care could be an ASX healthcare share to consider. It is a leading private healthcare company with operations across the world.

It has also just announced plans to bolster its network in the United Kingdom market with the proposed acquisition of Spire Healthcare for $1.8 billion. This is expected to create a leading private health care services provider in the lucrative market. It will also diversify Ramsay UK’s payor sources, and case mix, expanding the geographic reach of its capabilities and improving capacity utilisation.

In the meantime, the company looks well-placed to benefit from a post-pandemic backlog in surgeries in the near term.

One broker that is particularly positive on Ramsay is Citi. Last week the broker upgraded the company’s shares to a buy rating from neutral and increased its price target from $67.00 to $76.00.

Citi commented: “While the business currently remains severely impacted by the pandemic, we expect incremental news to be positive as health systems return to more normal conditions in FY22 and FY23.”

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a healthcare technology company that provides software which leverages artificial intelligence imaging algorithms to help with the early detection of breast cancer.

Management notes that its innovative products have an ever-increasing number of patents, trademarks, and regulatory clearances. The latter includes FDA clearance and CE marking.

Over the last few years, the company has been growing its market share at a rapid rate in the United States. For example, at the end of FY 2021, approximately 32% of US women had a Volpara product applied on their images and data. This compares to 27% from a year earlier.

This helped underpin a 57% increase in revenue to a record of NZ$19.7 million for the 12 months ended 31 March.

Pleasingly, more of the same is expected in FY 2022. Management has provided revenue guidance of approximately NZ$25 million to NZ$26 million, which represents year on year growth of 27% to 32%.

Morgans is a fan of the company. It currently has an add rating and $1.87 price target on its shares.

The post 2 excellent ASX healthcare shares named as buys appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Back in 2018, CEO Elon Musk shared in a Tweet that Tesla (NASDAQ: TSLA) will open an old-school drive-in restaurant featuring roller skates and famous movie clips in a California Supercharger station. Historically, Musk has made some bold claims online, and not all of his ideas have come to fruition.

For this reason, it made headlines when Tesla actually filed for trademarks in the restaurant services industry — over three years later.  Despite the hype, if Tesla goes through with a restaurant in its Supercharger network, investors need to carefully consider whether it is a worthwhile investment of capital and management energy.

The problem Tesla wants to solve

Tesla’s Supercharger network consists of 908 Supercharger stations  across the country, each with varying numbers of individual Superchargers. The problem is that charging a Tesla takes time, and the company wants to provide Tesla drivers with entertainment while they wait to hit the road again.

However, doing some digging on Tesla’s Supercharger map reveals some insight into this problem. In the U.S., not a single Supercharger can be found beyond a short walking distance to a restaurant, coffee shop, grocery store, or service plaza. Tesla has located most Supercharger stations near several of these establishments, and some even have direct access to shopping centers.  

With Supercharger stations already providing Tesla drivers with options for spending their downtime, the Supercharger network does not translate to a surefire captive market for Tesla. However, Elon is set on bringing retro-style entertainment to the Supercharger network in hopes that it will nonetheless drive revenue and attract new customers.

Is this problem worth solving?

Before addressing this question, it’s important to understand all the charging options that Tesla drivers have. Supercharger stations, destination chargers, and at-home chargers all have different use cases, pros, and cons.

Supercharger stations are located in most major cities and along popular travel routes for high-speed charging during long-distance drives.  A standard Tesla Model 3 can charge to full capacity in under an hour at a Supercharger. Charging fees can vary based on location, charge volume, and seasonality but generally run around 28 cents per kilowatt-hour (kWh).  

Destination chargers are installed by Tesla’s ‘Charging Partners’ — usually shopping centers, hotels, movie theaters, or restaurants — and allow patrons of those businesses to charge for free. A destination charger’s speed is significantly lower than a Supercharger, but drivers can easily reach half or full battery capacity for free while shopping or staying at a hotel.

Drivers’ final charging option is to use their at-home charger, which is included with every Tesla vehicle purchase. The added utility expense varies based on location, but the average U.S. electricity rate runs about 13.2 cents per kWh — less than half the price of using a Supercharger.  

With the ability to charge cheaply at home and free at over 4,500 destination chargers across the country, it’s perfectly logical in many cases for a Tesla driver to never use a Supercharger. Essentially, the only use case for a Supercharger is a road trip, and even in those cases many drivers would likely choose other food, coffee, or shopping options in the area over Tesla’s proposed retro diner while they wait.

Knowing this, it is difficult to argue that it would be worth it for Tesla to invest so heavily in enhancing user experience in the less-frequented Supercharger network. Plus, considering the business incentive for being a Tesla Charging Partner, it’s plausible to expect businesses to open destination chargers at a faster rate than Tesla launches new Supercharger stations.

Tesla, keep your eyes on the road

There is undoubtedly a lucrative captive market opportunity in electric vehicle charging in general. However, that opportunity will likely be more valuable for Tesla’s Charging Partners via destination chargers than for Tesla via its Supercharger network because of the frequency of their respective usage and driver options during their charge time.

Especially considering the restaurant industry’s infamously razor-thin margins, most investors would prefer to see Tesla stay focused on expanding production capacity, recovering its sales slump in China, and fixing the “significant mistakes” it made in rolling out its solar roof business. If not, the diversion of company resources to a restaurant venture will very likely hurt the stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla’s restaurant plan is an unprofitable detour appeared first on The Motley Fool Australia.

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Taylor Weldon has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is lifting today after the company announced it’s joining a global industry association.

At the time of writing, shares in the lithium producer are trading for $8.45 – up 2.3%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is 0.33% higher.

Let’s take a closer look at today’s news.

Vulcan share price rising

In its statement to the ASX, Vulcan Energy advised it has been accepted as a member of the Global Battery Alliance (GBA). Other businesses within the group include Wesfarmers Ltd (ASX: WES), Volkswagen Group and Alphabet Inc (NASDAQ: GOOGL).

The GBA is a public-private partnership hosted by the World Economic Forum with a mission to create a “sustainable battery value chain”.

According to the group, this includes “lowering emissions, eliminating human rights violations, ensuring safe working conditions across the value chain, and improving repurposing and recycling”.

Vulcan says its role in the group will be to “advance projects and initiatives” on battery input materials and their “transparency and traceability”.

While the Vulcan share price is higher, its rise today is a little muted compared to other trading days.

Management commentary

Vulcan Energy managing director Dr Francis Wedin said:

Vulcan is pleased to join the major industry, public institution and NGO members who form the Global Battery Alliance. Our goal is lithium production for the battery market with net zero greenhouse gas emissions, through our ZERO CARBON LITHIUM Project, but also by driving systemic change across the industry.

As a member of the GBA, we look forward to working with our fellow members to shape this agenda at this critical juncture in Earth’s history as we aim to fundamentally change transportation and energy for the better.

Vulcan share price snapshot

During the past 12 months, the Vulcan share price has increased by an astonishing 1,770%. In January, shares in the company reached an all-time high of $14.20. Since then, however, the company’s value has decreased 41.1%.

Given its current valuation, Vulcan Energy has a market capitalisation of around $910 million.

The post The Vulcan Energy (ASX:VUL) share price is rising today appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price is having a pretty decent day today. At the time of writing, Telstra is up 0.28% to $3.60 a share. That’s just a whisker away from Telstra’s 52-week high of $3.61, which we saw earlier this month.

This follows a very decent few months for Telstra. Since reaching a new all-time low of $2.66 a share back in October last year, Telstra is up almost 34% from those lows on today’s pricing. It’s also up 4.66% over the past month, and up 19.3% year to date.

So what’s gone the telco’s way in 2021 so far?

Well, Telstra shares seemed to get a bit of a boost when the company announced a structural separation plan back in late March. The company intends to split itself into 4 separate regulatory and legal divisions by the end of the year, all still trading under the Telstra umbrella.

These divisions will be titled InfraCo Towers, InfraCo Fixed, ServeCo and Telstra International. Each one will house a separate division of Telstra’s business, which might help to unlock value in some of Telstra’s infrastructure assets.

There was also speculation last year that Telstra would be forced to cut its dividend in 2021, due to the company’s earnings payout policy of returning between 70-90% of underlying earnings. This was looking hairy last year, as the company reported that its underlying earnings had fallen 9.7% in FY2020 compared to FY2019. However, in October, Telstra all but guaranteed to keep its dividends steady at 16 cents per share in 2021. It also stated that the board was “acutely aware of the importance of the dividend to shareholders”. This may have also helped Telstra shares recover in the months since.

So where to from here for Telstra?

Is the Telstra share price a buy today?

With Telstra straddling its 52-week high today, you might be wondering if the company is still a buy today. Well, one broker who thinks it might be is Goldman Sachs. Goldman reiterated its buy rating on Telstra shares earlier this month, with a 12-moth price target of $4 per share. That implies an upside of roughly 12% on current pricing.

Goldman is bullish on Telstra partially due to its restructuring plans. It also feels that Telstra will be able to comfortably retain its 16 cents per share annual dividend going forward.

The post Are Telstra (ASX:TLS) shares still cheap today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At lunch on Wednesday, the S&P/ASX 200 Index (ASX: XJO) has ignored weakness on Wall Street and continued its ascent. The benchmark index is currently up 0.35% to 7,405.9 points.

Here’s what is happening on the market today:

SEEK shares upgraded

The SEEK Limited (ASX: SEK) share price is pushing higher today. This follows news that analysts at Macquarie have upgraded the job listings company’s shares to an outperform rating with a significantly improved price target of $40.00. According to the note, the broker believes SEEK will benefit greatly from improving yields on its ads after discounts are removed. In addition to this, with Macquarie expecting the Australian unemployment rate to 4% in 2023, it is forecasting strong growth in ad volumes in FY 2022.

IAG update

The Insurance Australia Group Ltd (ASX: IAG) share price is on the rise today following an update on claims relating to the recent severe weather in Victoria. The insurance giant revealed that, as of Tuesday 15 June, it had received around 4,300 claims. These claims were predominantly for property damage. Management expects claims to rise as residents return to their homes. And while it expects these claims to take it beyond its guidance and perils allowance for FY 2021, it has additional protection in place to limit the impact.

Tech shares under pressure

The Australian tech sector is under pressure today following a tough night for the Nasdaq index. The tech-heavy index tumbled 0.7% during overnight trade. This has led to Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) dropping lower today, dragging the S&P/ASX All Technology Index (ASX: XTX) 0.55% lower.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Wednesday has been the Medibank Private Ltd (ASX: MPL) share price with a 3% gain on no news. The worst performer has been the Galaxy Resources Limited (ASX: GXY) share price with a 5% decline. A number of lithium companies are under pressure today.

The post ASX 200 up 0.35%: SEEK upgraded, Afterpay lower appeared first on The Motley Fool Australia.

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James Mickleboro owns Galaxy and SEEK shares. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Element 25 Ltd (ASX: E25) share price will be one to watch today after the mineral exploration and mining company announced another milestone development for its Butcherbird manganese project.

At yesterday’s market close, the Element 25 share price finished the day at $2.25. In early trade this morning, the stock has slipped 0.89% to $2.23.

Element 25 progresses multi-stage strategy

In today’s statement, Element 25 advised that AK Evans Group Australia is currently transporting the first manganese concentrate shipment from the Butcherbird manganese project to Port Hedland, Western Australia.

The Butcherbird project is a wholly-owned open pit mining development in the Pilbara region of Western Australia. Manganese is emerging as an increasingly important ingredient for EV batteries. This project is believed to contain the largest onshore manganese resource in the country.

The trucks loaded the first manganese concentrate and left on 8 June for loading onto the ship. Around 27 kilotonnes (kt) or 27,000 tonnes of material will make up the entire haulage over coming days.

Element 25 expects the ship to be fully loaded by the last week of June, ready for departure.

In addition, Element 25’s project team will now turn its attention to ramping up operations for a Stage 2 expansion. This follows the commissioning of the Stage 1 processing plant to produce 365 kt of manganese concentrate over a 40-year mine life.

A pre-feasibility study, completed in May 2020, highlighted significant growth beyond the initial Stage 1 production volumes. Current JORC estimates are that the project will produce 263 million tonnes of manganese ore.

Element 25 managing director, Justin Brown commented:

The team has bowled over yet another key milestone on our journey to fast-track the development of the Project. The successful commissioning and ramp up of this first stage of development provides a fantastic foundation from which to grow this business both by expanding concentrate production as part of our Stage 2 expansion plans but also by developing the processing infrastructure to produce battery grade Zero Carbon Manganese products for the Li-Ion batteries which will power the electrification of the global vehicle fleet.

Element 25 share price summary

Over the past year, the Element 25 share price has jumped almost 490%, with year-to-date performance of 42%. It reached an all-time high of $2.90 in late March before investors took profits off the table.

Element 25 has a market capitalisation of roughly $334 million, with more than 148 million shares on its registry.

The post [To be checked] Why the Element 25 (ASX:E25) share price will be one to watch today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a few S&P/ASX 200 Index (ASX: XJO) tech shares that might be quality ideas to look at.

Technology businesses have the capacity to produce attractive growth with good margins, particularly if they become one of the market leaders. 

These two ASX 200 tech shares could be good ones to think about:

Hub24 Ltd (ASX: HUB)

Hub24, the financial platform business, is currently rated as a buy by the broker Credit Suisse, with a price target of $27.70 over the next 12 months.

The broker is attracted to the continuing growth that Hub24 is producing. That growth is expected to continue in the final quarter of FY21.

That third quarter market update saw platform quarterly net inflows of $1.9 billion – an increase of 41% on the prior comparable period. That was also an increase of $0.2 billion than the last quarter.

Total funds under administration (FUA) is now $51.4 billion, including Xplore Wealth, which contributed $17.2 billion as at 31 March 2021, with platform FUA of $35.6 billion at 31 March 2021 (up 136% year on year). Portfolio, administration and reporting services (PARS) FUA of $15.8 billion.

In that update, the ASX 200 tech share said that its new business pipeline continues to grow with 28 licensee agreements signed during the March quarter, with large boutique licensees, self-licensed practices and a new distribution agreement with an existing Xplore client where additional Hub24 products will be offered alongside the current Xplore solutions.

According to the latest available ‘Strategic Insights’ data for the Australian platform market, Hub24’s market share has increased to 2.5% from 1.75% at December 2019. Xplore’s market share – 1.85% at December 2020 – increases Hub24’s combined market share to approximately 4.3%.

TechnologyOne Ltd (ASX: TNE)

TechnologyOne, the global enterprise resource planning (ERP) software business, is rated as a buy by Morgans.

The broker has a price target on the business of $10 over the next 12 months. Morgans is focused on the software as a service (SaaS) and recurring revenue nature of the expected growth.

TechnologyOne released its FY21 first half result to the market a few weeks ago.

Whilst total revenue was up 5% to $144.3 million, expenses declined 5% to $107.4 million. The business saw a large increase in profitability with a 44% increase of profit before tax to $37.3 million and a 48% increase of profit after tax to $28.2 million.

The SaaS annual recurring revenue (ARR) figure increased 41% to $155.8 million.

TechnologyOne believes it’s well positioned as the markets it serves are resilient. Its SaaS software solution is mission critical to its markets around the world. Management are expecting to see its SaaS ARR continuing to grow strongly – up more than 35% over the full year. It’s expecting profit before tax to be up between 10% to 15% for the full year.

Over the long-term the company is expecting to grow penetration with existing customers, win over new customers and expand globally.

In the next few financial years, the ASX 200 tech share’s SaaS and continuing business is expected to grow by more than 15% per annum, once it has wound down its legacy licence fee business.

It’s expecting total ARR to increase to more than $500 million by FY26, from the current base of $233 million. Unlocking economies of scale with the SaaS software should mean a continuing profit before tax margin improvement to 35%.

The post 2 quality ASX 200 tech shares that might be buys appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Rhythm Biosciences Ltd (ASX: RHY) share price is rising following the company’s latest addition to its ColoSTAT clinical trial.

In early morning trade, the medical device company’s shares were up 3.57% to $1.015 before retreating to $1.00 at the time of writing, up 2%.

What did Rhythm announce?

In its statement, Rhythm advised Sonic Healthcare Limited (ASX: SHL) business, Sonic Clinical Services, has joined its ColoSTAT clinical trial.

Rhythm’s ColoSTAT is an experimental test kit that is being trialled as a low-cost, easy-to-use blood test to detect colorectal cancer.

Sonic Clinical Services’ Independent Practitioner Network (IPN) Medical Centres will bring a network of independent clinicians across NSW and Victoria.

IPN is recognised as Australia’s largest network of medical clinics. Currently, the business has more than 2,000 doctors across 160 medical centres nationally, providing 10 million consultations per year.

The first patients from Sonic Clinical Services’ IPN medical centres have already been recruited.

Rhythm CEO Glenn Gilbert said:

We are already working with Sonic Healthcare under an existing partnership for the storage and testing of ColoSTAT blood samples as part of the Study 7 clinical trial.

Expanding this partnership with an additional division, in Sonic Clinical Services’ IPN, is a natural progression that will ultimately contribute to the success of the ColoSTAT clinical trial.

More on ColoSTAT and the Rhythm share price

Rhythm develops and commercialises Australian medical diagnostics technology for sale in domestic and international markets. The company’s ColoSTAT is the first proposed product-in-development intended to accurately test and detect the early stages of colorectal cancer.

It’s estimated around 850,000 people lose their life from colorectal cancer each year.

In the United States, Europe, and Australia, more than 130 million people aged between 50-74 years are unscreened for colorectal cancer. This represents an addressable market opportunity of more than $6.5 billion.

The Rhythm share price has accelerated by 1,300% in the past 12 months, reflecting positive investor sentiment. Additionally, the company’s shares reached an all-time high of $1.675 in March, before some profit-taking swooped.

At today’s prices, Rhythm has a market capitalisation of roughly $205 million, with approximately 202 million shares on issue.

The post Why the Rhythm (ASX:RHY) share price is climbing today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Once upon a time, memes were limited to images, gifs, and videos shared on the internet to give us a laugh. But somehow, the stock market fell prey to memeification, so here we are… analysing what a meme stock is.

Defining a meme stock

A meme stock is typically regarded as a stock that lacks fundamental backing and is, more so, driven in popularity by hype. Usually, it is retail investors that drum up support for these stocks using social media channels such as TikTok and Reddit.

Once this type of stock ‘goes viral’, the resulting extreme share price jumps can attract even more investors as the fear of missing out (FOMO) kicks in. This momentum can then lead to a stock price that is divergent from all fundamental measures of analysis. As a result, many commentators see the valuations as humorous – thus, a meme stock is born.

Be warned – meme stocks are not for the faint of heart. The irrational speculation surrounding them is usually paired with violent volatility. Take GameStop Corp (NYSE: GME) for example. The gaming retailer’s stock price increased nearly 25% between 4 June to 9 June. Then it proceeded to fall 27% the very next day.

What’s all the hype about?

Meme stocks really came to prominence with GameStop. What originally began as a WallStreetBets led short-selling squeeze turned into a full retail investor onslaught. Since then, the attention has spread to several stocks that are heavily shorted – including BlackBerry Ltd (NYSE: BB), AMC Entertainment Holdings Inc (NYSE: AMC), and Bed Bath & Beyond Inc (NASDAQ: BBBY).

The reason many are now talking about these types of shares is because of the potential returns. While the risk is extreme, some speculators cannot dismiss the possible gains on offer. For instance, the US-based movie theatre chain AMC Entertainment has returned 2,837% so far this year. While the valuation may look like a joke, for those who managed to achieve them, the returns are certainly no laughing matter.

However, the catch is, to really capture the upside, you must be among the early speculators. Once a stock reaches the late or FOMO phase, it’s often too late. Because of this, many speculators are constantly on the hunt for the next GameStop or AMC…

Foolish takeaway

When it all boils down, meme stocks are extremely high-risk ‘investments’. While they may seem like a joke to some, for those left holding the baby when the momentum swings the other way, it can all end in tears.

The stock market is often full of distractions. The potential ‘get-rich-quick’ investments are often seductive – but unless a company’s fundamentals catch up with its share price, it can very easily all come tumbling down.

Lastly, many experts argue that building wealth via the stock market is best done by utilising the power of compounding. It may not be the most exciting way, but it’s the easiest way to ensure the stock market doesn’t make a meme of your finances.

The post What is a meme stock, and why is everyone talking about them? appeared first on The Motley Fool Australia.

More reading

• GameStop earnings: No sign of a turnaround
• GameStop (NYSE:GME) share price slides despite 25% sales jump
• Here are the US shares ASX investors were buying last week
• Why AMC Entertainment skyrocketed 160.4% in May
• AMC Entertainment (NYSE:AMC) takes meme stock crown, up 95%

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BlackBerry. The Motley Fool Australia has recommended BlackBerry. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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