Clover Stock Has Limited Rebound Potential, So Stay Away

Talk of this insuretech stock being a great short-squeeze play is making the rounds once again. So, should you buy in now at around $8.50 per share, in anticipation of it zooming back to $20 per share and beyond?…

Not so fast. Clover Health (NASDAQ:CLOV) is still be one of the most talked-about stocks on Reddit’s r/WallStreetBets subreddit, but this may not translate into higher prices over the next few months for two reasons.

First, unlike some other “meme stocks,” this one is more dependent on the trend itself making a comeback.

Without this investing style coming fully back in vogue, the company’s weakening fundamentals could continue to hold it down. Other Reddit stocks, which have more going for them than just the “meme stock” catalyst, may have a greater chance of soaring. Whether or not the trend becomes popular again.

Second, uncertainty is rising that the stock market can overcome recent concerns, and avoid a correction, meltdown, or sell-off.

If such an event occurs, investors in stocks like this one, priced more on hype and hope than on fundamentals, could be in for a rude awakening.

Even if you’re confident that the “meme stock” trend isn’t over, stick to more promising plays in this category, and hold off buying this one.

CLOV Stock Will Flounder

Earlier this month, I said Clover could be one of the Reddit stocks that could bounce back if the “meme stocks” trend has runway. To some extent, I believe that’s still true.

If the trend overall makes a comeback, names still popular with the r/WSB community could have room to pop once again, but don’t expect CLOV stock to perform well in the near term if this trend doesn’t come back for another encore.

The red flags pointed out by Hindenburg Research earlier this year may be overblown. Department of Justice investigations sound concerning but are par for the course for Medicare Advantage plan providers such as this company.

Yet, there’s a larger issue that could hold Clover Health down: its weakening fundamentals. Wall Street analysts have been underwhelmed by its financial performance in recent quarters. Disappointment could continue, in terms of both its revenue growth, as well as the prospects of its eventual profitability.

In contrast, several of the other popular “meme stocks” may have room to bounce back. Even if the trend itself fails to make a comeback.

I’m talking about names like ContextLogic (NASDAQ:WISH), which could see growth re-acceleration starting in the next few fiscal quarters. Tilray (NASDAQ:TLRY), another name previously popular with Reddit traders, could make a comeback as well, thanks to…

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