3 Undervalued Reddit Stocks Not Getting the Love They Deserve

Followers of popular Reddit stocks are likely very familiar with Ape Wisdom, the tracker from which the shares below were identified. The name of this site is a nod to the so-called apes, made famous by r/WallStreetBets and other meme retail investing groups. What’s their strategy? There isn’t one unified investment strategy overall. Instead, apes build consensus around specific companies they find compelling, and use their collective capital to influence share prices.

This is the same strategy institutional investors use, just less dressed-up. Indeed, while retail investors may not be considered the “smart money” in the room, that doesn’t imply apes don’t have good ideas. They do, and it’s clear judging by many of the names trending on Ape Wisdom that they’re looking in the right places.

Here are a few Reddit stocks that look like solid picks by the ape community.

LULU Lululemon $360.40
PLTR Palantir $15.02
DG Dollar General $153.05

Lululemon (LULU)

Lululemon (NASDAQ:LULU) shares jumped after earnings were released on June 2. However, shares of LULU stock remain far below consensus target prices, suggesting that there’s quite a bit of appreciation left to be had.

Lululemon’s press release began with the information that management deemed most important. In this case, the fact that sales increased by 24% to $2 billion, and comparable sales increased by 14% year-over-year.

Comparable sales refer to sales from stores that have existed for more than a year. So, a 14% increase is a solid number. That’s on top of the growth Lululemon is seeing from new locations.

Given Q2 guidance for 15% growth overall, and an average target price of $414 per share, this is a stock to buy. Notably, LULU shares jumped from $330 to $365 due to the strong results. It looks like they can move even higher.

Palantir (PLTR)

Palantir (NYSE:PLTR) stock is probably going to surprise investors soon. That surprise could be good or bad, given shares are already trading well beyond their $8.68 consensus price, around the $15 level.

Artificial intelligence is the reason for the potential volatility with this stock, as with many high-profile growth stocks right now. Palantir is making a push into AI after recently announcing its platform called AIP. Initial versions of AIP were scheduled to be released to select customers in May per the company’s earnings report on May 8.

However, Palantir announced those early results along with various partnerships at AIPCon, which was met with significant investor interest.

The positive news here is that Palantir remains very early in its development cycle, as it relates to AI. The firm’s Q2 results could potentially be positively impacted by AI in a similar manner to those of Nvidia (NASDAQ:NVDA).

Although Palantir is already trading at very expensive levels, it’s entirely possible that AI could drive an even higher valuation. At least, that’s what investors are clearly banking on.

Dollar General (DG)

Dollar General (NYSE:DG) is already making a comeback, following disappointing earnings.

Income was down nearly 7% and sales only increased by 1.6% which was far below the 3.8% Wall Street sought. The company blamed retail theft and pinched consumers who received smaller-than-anticipated tax returns. Markets punished DG stock, sending it down roughly 20% on the news. The firm’s recession-proof reputation, the argument goes, is no more.

The consensus is that low-income consumers are cutting back, hurting Dollar General. At the same time, higher-income consumers haven’t been hurt enough, or at least to the extent that they may consider trading down to Dollar General.

But there’s an opportunity here. DG stock rebounded the day after the news was announced. It looks like the market overreacted to the downside, signaling this Reddit stock could be poised for a rebound. If higher-income consumers trade down to Dollar General, as many experts think will be the case, this is among the Reddit stocks I think has big upside, particularly if we are facing a recession in the next 6-12 months.

On the date of publication, Alex Sirois did not have (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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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