Revlon is the latest focus of the meme stock craze. Shares of the cosmetics giant have surged since filing for bankruptcy last week, as retail investors on Reddit piled into the company. Lance Ippolito, the head trader at New Money Crew, explained why Revlon stock is soaring so dramatically and what the headwinds are for the retail sector as it faces a wave of bankruptcies. "Really with these meme stocks, is you wanna what I call date them. You don't want to get committed. You don't want to marry them long-term. You don't want to own them for years or so."

Opening Bell

Why Is Revlon the Latest Meme Stock?

we're here to break down the new meme stock craze is Lance Eppolito head trader at new money crew Lance, it's good to see you, why is this stock surging so dramatically? I think it's a combination of a few things, a bankruptcies are bullish apparently in the stock market and we, we can take a look at Hertz, uh, during the whole, uh, you know, pandemic fall and then boom of the meme stock craze where you know, hurts, rallied, I think 500% off the lows and we've seen Revlon rally 650% off the lows. Um, so when they went bankrupt apparently shortly after a company out of India Came out and said, Hey, we might look to acquire Revlon and that really got shares moving higher. I think one day they were up something like 110%. But what's fun at least from a trading perspective is, you know, you're having this kind of volatility and these kind of movement that the Wall Street bets or the Reddit traders that we heard of so much over the past couple of years, you know, they are really sending, uh, volume in the stock and obviously we've seen a huge move higher, I think something like 100 plus million shares have been trading and Revlon and that was just shy of Tesla over the past couple days we've been seeing. So Lance, what's interesting is revlon seems to be a similar case to what happened to hurts a few years ago that car rental company now paying big bucks to have tom brady as its spokesperson, also filing for bankruptcy retail traders pile then they sent the stock soaring. What are the risks involved? And do you think revlon will go the way of hurts? Uh that's a hard long term decision to make and in the short term obviously a 650% move and what a week or so is tremendous. But really with these meme stocks is you wanna what I call date them, you don't want to get committed, You don't want to marry them long term, you don't want to own them, you know, for years or so. And that just goes back. If you look at some of the meme stocks in the past like AMC like aversion galactic like a Sophie like a Gamestop, you know these names really fell from their highs and now they just really don't trade that much or they don't move as much I should say as they used to. But um if I was looking, let's say at a beauty or cosmetic stock as a possible investment or buy and hold something with a little bit better fundamentals. I would look at companies like Cody beauty C. O. T. Y. I think they have a partnership with kylie Jenner and alta, all the beauty there in target stores ticker U. L. T. A. Well another question that I have is retail in general. Some concerns that we could see more bankruptcies that Revlon won't be the last and certainly at the start of the pandemic two years ago, we saw a host of bankruptcies as well. I know you mentioned a few companies like Cody for instance, that according to your analysis do have pretty strong balance sheets, they can weather the storm, but if a recession does come Lance, what do traders need to know about the retail space in general when they think about where to put their money? I think we've actually seen the, you know, the stock market is forward looking and we've actually seen a lot of retailers, if you look at the mall retailers, for example, even if you look at your big box retailers like walmart and and target these names have sold off tremendously already. And, and I don't think you're gonna have obviously big box retailers go bankrupt maybe, uh, you know, some of the smaller companies out there, but these, I mean, these charts are just horrendous to be honest with you. And I think you've had The recession fears already priced in most of these retailer names out there. Kind of, my rule of thumb rule of thumb is if a stock is under $5, so we'll say a retail stock under $5 or so, just avoid it because when the stock gets in that territory, the volatility is just there, the chance of bankruptcy is there and you really just don't want to be involved in it unless you're really day trading, it can take that risk. Okay, so that's the threshold that everyone has to remember. Lance, I'm glad you gave that to our viewers. But yes, questions about a recession, whether or not it will happen, consumers will they pull back on spending? I mean, certainly we've already seen a shift in what consumers are buying different to what they were buying during the pandemic now too. This current environment. I'm just curious your take on consumer spending and what it might mean for retail this summer. So I'm gonna go out complete 180 of what everyone's talking about. And I actually think we're gonna see a strong consumer and the reason for that is I believe we're gonna have a energy prices, especially at the pump gas prices which have already been coming down over the past few days. I think you're going to have uh, gasoline prices come down more people are gonna go out and spend. So you look at names like Nordstrom Macy's, especially the luxury names, they really held up well even over the past few months, the luxury retailers, people are gonna go out drive again because gas prices are lower and they're gonna spin. So you're gonna see uh, you know, your targets, your walmart, your Nordstrom even I think your Lowe's and Home Depot. I know everyone's scared about housing, but those retailers too are starting to actually look really attractive here. All right, Lance, Ipolito head trader at new money. Crew Lance, thanks so much for coming on the show.