In a surprising turn of events, social media giants Reddit and Trump Media have joined the ranks of meme stocks with their highly anticipated initial public offerings (IPOs). These companies, known for their uncertain profit outlooks, have captured the attention of investors and experienced significant gains in their stock prices.

On its first day of trading last week, Reddit's IPO exceeded expectations by rising an impressive 48%. The momentum continued on Monday when the stock gained an additional 30%. Meanwhile, Trump Media stole the spotlight by skyrocketing as much as 59% on its debut trading day, before closing with a gain of 16%. The following day, the stock rose by another 14% to reach a closing price of $66.22. It is worth noting that former President Donald Trump holds a majority stake in Trump Media, which could potentially bring him substantial profits.

Analysts and experts are drawing comparisons between the surge in Reddit and Trump Media stocks and the meme stock frenzy of 2021, which boosted the shares of companies such as GameStop and AMC Entertainment. While there are differences between the two groups, they share the commonality of having unclear financial prospects. However, this did not deter small investors from buying shares, whether to support struggling companies, rebel against short sellers, or seize the opportunity for potential gains.

Trump Media, for instance, reported a loss of $49 million in the first nine months of 2021, with revenue totaling just $3.4 million while paying $37.7 million in interest expenses. In a recent regulatory filing, the company stated that it anticipates continued losses "for the foreseeable future." Nevertheless, the enthusiasm surrounding Trump Media remains high, as demonstrated by its impressive market debut.

In terms of user engagement, Reddit and Trump Media are still vying for a larger share of the social media landscape. Research firm Similarweb estimates that Truth Social, the social media platform launched by Trump Media, had approximately 5 million monthly visits in February this year. In comparison, Facebook recorded a staggering 15.2 billion visits, while Reddit attracted 2 billion visits. These figures illustrate the uphill battle that both companies face in trying to compete with more established platforms.

It is important to note that Reddit, despite being in operation for nearly 20 years, has yet to turn a profit. The company, plagued by management troubles and user controversies, heavily relies on user growth and advertising revenue to sustain its operations. A regulatory disclosure revealed that approximately 76 million users engaged with Reddit's various communities in December.

The meme stock phenomenon is not unfamiliar to the market, as demonstrated by the case of GameStop and AMC. While these companies experienced a surge in stock prices driven by retail investors in 2020 and early 2021, their market values have now significantly decreased. GameStop now faces challenges as it struggles to modernize its business model. Analysts are skeptical about its long-term potential, with some predicting a runway of no more than five years.

In contrast, industry analyst Michael Pachter of Wedbush Securities expresses even greater skepticism regarding the fervor over Trump Media. Pachter points out that GameStop had revenue exceeding $5 billion in 2020, whereas Trump Media's revenue pales in comparison, standing under $5 million. Pachter believes that the success of GameStop has been surpassed by Trump Media's trading performance.

While it is too early to determine the future trajectory of these meme stocks, the public debut of Reddit and Trump Media has undoubtedly stirred up excitement and speculation among investors. The meme stock craze continues to captivate the market, proving that unpredictable factors and small-time investors can have a significant impact on the stock prices of companies with uncertain financial outlooks. Only time will tell whether these meme stocks will hold strong or succumb to the fate of their predecessors.