CNBC’s Jim Cramer said Tuesday that Wall Street Bets investors flexed their muscles with analysts after the online investment group sparked an unsuspecting rally in Wendy’s shares.
The stock rose to a record after receiving a recommendation on the popular Reddit forum, which drove big moves at GameStop and AMC Entertainment that year.
“I want you to forget about the analysts now. The person in charge of Wendy’s is Reddit user Chillznda,” Cramer said on Mad Money. “In order to [user] and some other cheap anonymous posts, Wendy’s stock is skyrocketing higher. “
Wendy’s shares rose nearly 26% on their best trading day in more than a year. The momentum helped propel other restaurant stocks like Wingstop, Domino’s and Shake Shack higher on Tuesday, he added.
Cramer noted that the endorsement was a departure from the headline-grabbing short squeezes that put the spotlight on the retail investor group that has grown in size during the coronavirus pandemic.
A short squeeze occurs when investors betting on falling stock prices are forced to cover their losses when the price rises instead.
“Now they are spreading their wings, even on an institutional favorite like Wendy’s with a very low short position,” said Cramer.
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While Wendys and other meme games may be considered overvalued by traditional valuation measures, the market must reckon with a new class of investor, Cramer said.
“These metrics are important because everyone uses them,” he said, as do the earnings per share projections. “If enough people with enough money start valuing stocks differently, their new metrics will matter too, even if you think they’re absurd.”
“At some point, meme stocks will run out of breath, but right now I think they’re just getting started.”