These stocks have the right conditions to trigger short squeezes.
Short squeezes have been among the most popular and controversial topics on Wall Street in the past year or so. In early 2021, groups of online stock traders on Reddit began orchestrating targeted buying campaigns in some of the market’s most heavily shorted stocks in an attempt to trigger short squeezes. A short squeeze is a large, short-term spike in a stock’s share price that occurs when a significant number of short sellers are forced to buy shares and exit their positions all at once. Here are eight stocks primed for the next big short squeezes, according to Ortex Analytics.
Canoo Inc. (GOEV)
Electric vehicle maker Canoo went public by merging with a special-purpose acquisition company, or SPAC, in December 2020. At the time, the stock was trading at $22.80. In May 2021, the company disclosed an investigation by the U.S. Securities and Exchange Commission following several executive departures. Short sellers understandably piled into the stock. In May 2022, short sellers got another reason to target the company when Canoo disclosed it has “substantial doubt about our ability to continue as a going concern.” Canoo shares are now trading at around $3.50, and its short interest stands at about 28% of its float, or free-trading shares.
Joann Inc. (JOAN)
Joann is an omnichannel arts and crafts retailer that operates about 850 stores in the U.S. Joann went public in March 2021, selling shares at $12 in an initial public offering. After a volatile year of trading and disappointing sales numbers, Joann shares have recently fallen back below their IPO price to around $8.30. In March, the company reported a 12.4% decline in same-store sales in the fourth quarter. Short sellers have routinely targeted IPO and SPAC merger stocks since the beginning of 2021. Joann’s short interest is about 35% of its float, making it a strong short squeeze candidate.
Fisker Inc. (FSR)
Yet another EV stock that short sellers have successfully targeted as of late is Fisker. Fisker went public via a SPAC merger in October 2020 at a price of around $9. After trading as high as $31.96 during the peak of the Reddit trading craze in early 2021, Fisker shares had dropped all the way to $10.75 as of May 27. The stock took a hit in late May after Fisker announced an at-the-market distribution agreement to sell up to $350 million in stock. Short sellers love dilution, and Fisker’s short interest is up to 38% of its float.
Senseonics Holdings Inc. (SENS)
Senseonics designs and sells the Eversense implantable glucose monitoring system for people with diabetes. Senseonics demonstrated its short squeeze potential when the stock more than quadrupled in value in the first half of 2021 following positive trial data suggesting the Eversense device can safely remain implanted for up to 180 days. The U.S. Food and Drug Administration approved the 180-day version of Eversense in February 2022. Unfortunately, traders took the news as an opportunity to cash out on big 2021 gains. Short sellers are betting on even more downside ahead, and Senseonics’ short interest stands at 18% of its float.
CureVac NV (CVAC)
CureVac is a clinical-stage biotechnology company developing RNA-based vaccines and therapies to treat diseases such as COVID-19, rabies and influenza. While 2021 was a huge year for many COVID-19 vaccine developers, it was a forgettable year for CureVac investors. In October 2021, CureVac and partner GlaxoSmithKline withdrew their first-generation COVID-19 vaccine candidate for consideration for approval by the European Medicines Agency. Short sellers may see that withdrawal as a red flag. CureVac’s short interest has grown to about 8% of its float, but positive news on a second-generation COVID-19 vaccine candidate could send the stock soaring.
SmileDirectClub Inc. (SDC)
SmileDirectClub has been one of the most heavily shorted stocks in the market since it completed its high-profile IPO in 2019. SmileDirectClub has been a home run trade for short sellers up to this point. The company went public at a price of $23 per share, but roughly two-and-a-half years later it is down more than 90% to under $1.50. SmileDirectClub’s revenue dropped 32% in 2021, and it still has not reported a single profitable quarter as a public company. Ortex estimates 22% of SmileDirectClub’s float is held in short positions.
Canopy Growth Corp. (CGC)
Canopy Growth is one of the largest legal Canadian cannabis producers. Cannabis stocks accounted for some of the largest short squeezes in 2021, and Ortex data suggests Canopy may be primed for another squeeze in the near future. Canopy shares traded as high as $56.50 in early 2021 after Joe Biden won the U.S. presidential election and Democrats gained control of both houses of Congress. Unfortunately, the stock has traded all the way back down to under $5 after Democrats have failed to make any meaningful progress on cannabis reform. Canopy’s short interest is up to 19% of its float.
Lemonade Inc. (LMND)
Lemonade is an insurance technology company that is looking to streamline the way customers shop for insurance and file claims. Lemonade went public at an IPO price of $29 in July 2020. After roaring out of the gates to an all-time high of $188.30 in early 2021, the stock has since fallen all the way back below $23. Lemonade has reported impressive growth numbers, including 88% revenue growth in the fourth quarter. But the company’s net losses also continue to rise, a red flag for short sellers. Lemonade’s short interest is now 28% of its float.
These eight short squeeze stocks could take off in June:
— Canoo Inc. (GOEV)
— Joann Inc. (JOAN)
— Fisker Inc. (FSR)
— Senseonics Holdings Inc. (SENS)
— CureVac NV (CVAC)
— SmileDirectClub Inc. (SDC)
— Canopy Growth Corp. (CGC)
— Lemonade Inc. (LMND)
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8 Short Squeeze Stocks That Could Take Off in June originally appeared on usnews.com
Update 05/31/22: This story was published at an earlier date and has been updated with new information.