If you paid attention to the stock market back in 2021, you might remember the “meme stock” craze that pushed otherwise struggling companies to record highs.
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You might also remember those price surges were almost entirely the result of social media buzz rather than business fundamentals. Investors poured into the stocks mainly because they liked turning conventional Wall Street wisdom inside out — not because they thought the companies made good investments.
At the time, it seemed like a passing fad. Suddenly, however, meme stocks are a thing again. Shares of Opendoor, Kohl’s, Wendy’s, American Eagle Outfitters and other “embattled” companies have all seen recent surges similar to four years ago, Business Insider reported.
This trend is certainly good for the companies. But is it good for investors?
Most financial advisors warn against jumping on meme stocks because they tend to sink as fast as they rise. However, you can earn a profit if you follow the right rules. Here are three ways you can potentially cash in on meme stocks in 2025.
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Review the Fundamentals
This is something you should do with any stock — review its business fundamentals to make sure it is on solid financial footing. But it’s especially important with meme stocks.
TD Bank recommended looking over the company’s quarterly and annual reports, as well as its analyst reports. Once you’ve done that, ask yourself the following questions:
Are the company’s revenues rising?
Are its earnings increasing year after year?
Does it have a product lineup that makes sense to you?
Does its current stock price have room to grow based on consensus analyst price targets?
If the answer is “yes” to these questions, then you might be able to cash in on a meme stock.
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Pick Recognizable Brands
At the very least, a meme stock should have a brand that is recognizable to most investors, according to Fidelity. Meme stocks are volatile enough. What you don’t want is a stock that regular investors have never heard of.
“[This] could mean those investments share features of a certain kind of trend trading, creating the potential for them to get caught up in irregular trading activity,” Fidelity noted. “Following the herd or any other impetus that is not grounded in a strong fundamental basis for investing your money is never prudent.”
Think Short Term — Not Long Term
As Forbes noted, a couple of the more famous meme stocks didn’t have much staying power in terms of share price. GameStop’s price surged above $480 per share during its meme stock peak in early 2021, but it soon crashed back to reality and currently trades near $22.
Similarly, AMC Entertainment hit an all-time stock high of $625.48 on June 2, 2021 during its meme surge, according to MacroTrends. Today, you can buy the stock for about $3 a share.
Investors who were savvy (or lucky) enough to sell those shares at the peak cashed in big profits, but you can’t depend on that kind of luck. A good rule of thumb is to sell as soon as you have earned a decent profit on the stock — and that usually happens quickly.
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This article originally appeared on GOBankingRates.com: Meme Stocks Are Back in 2025: 3 Smart Ways To Profit Now
