Earlier this week, InvestorPlace’s Thomas Yeung posed an interesting question: Could Rite Aid (NYSE:RAD) become the next big meme stock? As meme stocks surged last week, The Wall Street Journal flagged the struggling pharmaceutical chain as a likely contender for the next r/WallStreetBets favorite. Yeung elaborated on the fact that, while RAD stock has performed dismally over the past year, that’s exactly what might appeal to contrarian investors seeking their next meme play.
Shares of RAD recently spiked when retail investor interest pushed the stock higher. But speculation is also rising that another new meme stock may be garnering favoritism among traders: T2 Biosystems (NASDAQ:TTOO).
TTOO Stock vs. RAD Stock: Which Is Worse?
Neither of these names are good investments. So, at first glance, it may seem difficult to assess which of these new meme stocks is the worse buy. Granted, the choice is between two unstable companies with minimal growth potential. While both TTOO and RAD stock surged last week on momentum from retail investors and boast impressive gains for the month, there’s no escaping the fact that both have shed almost all their value in the trailing one year. Over that period, TTOO stock is down more than 90% and RAD is down more than 70%.
As Yeung noted, declines of this magnitude could certainly help both companies catch the attention of retail investors seeking companies Wall Street won’t touch. Everyone remembers the iconic GameStop (NYSE:GME) short squeeze of 2021 and everyone wants to find the next one. And while both companies are certainly struggling enough to justify a massive short position, that doesn’t mean a short squeeze is imminent.
Pumping money into a struggling company because of social media hype isn’t usually a good idea. Just ask the retail investors who made ill-advised bets on MMTLP — the preferred shares of Meta Materials (NASDAQ:MMAT) — prior to the December 2022 trading halt.
So, neither RAD stock or TTOO stock are likely to rise long-term. However, it should be noted that the two aren’t quite the same. Rite Aid is a symbol of a bygone era. Meanwhile, at least T2 has the potential to mount a comeback. The company produces diagnostic products and has a decent backing from institutional investors. T2 also just regained compliance with one of Nasdaq’s listing requirements.
Why It Matters
To reiterate, this isn’t meant to imply that T2 is a good buy. But when compared to this week’s other top meme stock contender, it’s clear that TTOO stock is a better choice than RAD. Rite Aid may be trading at a higher price point than T2 right now, but as the meme stock hype dies down, RAD’s current losing streak will continue, likely erasing most of its recent growth.
As Yeung noted:
“Most importantly, investors face getting caught up in a meme frenzy that goes nowhere. Many speculators have bought shares of promising meme bets, only to see shares decline. Mullen Automotive (NASDAQ:MULN) has lost 99.9% of its market value since 2021, despite being among the most popular meme stocks.”
When unstable companies start trending on social media, investors would be wise to stay away. But it’s also important to remember that not all meme stocks are created equal.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.