Meme Stocks: Why Clover Health Could Take a Dive

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Trader Fred DeMarco works on the floor of the New York Stock Exchange, Friday, Feb. 28, 2020. Global stock markets are falling further on spreading virus fears. (AP Photo/Richard Drew)

Investors may want to avoid – or short Clover Health (CLOV).

Over the last few days, the stock exploded from a low of about $9 to a high of $28.85. All thanks to the Reddit crowd. While it was impressive to watch, overbought shares of CLOV are starting to pullback on a Bank of America downgrade.

Analyst Kevin Fischbeck just downgraded the stock to an underperform rating from neutral, with a price target of $10.  As reported by The Fly, “Following the 100% rally in the past week, the shares are now trading at a 70% premium to Alignment Healthcare (ALHC), its closest comp, despite a similar growth profile and lower near term margin trajectory. The analyst continues to believe the Clover Assistant provides value and helps reduce costs, but he says the company’s current growth trajectory does not support the valuation.”

Remember, when it comes to meme stocks, they can come down just as fast as they go up.    If you’ve been trading meme stocks, be extremely cautious.

Many times, it’s not worth the risk.

After falling about $5.25 on Wednesday, the CLOV stock is pulling back in pre-market.