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 couple of years. 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 nine stocks primed for the next big short squeezes, according to Ortex Analytics.
EVgo Inc. (ticker: EVGO)
EVgo is an electric vehicle charging technology company that short sellers have targeted aggressively. EVgo went public via a special-purpose acquisition company merger in July 2021, and its shares opened at around $15 following the merger. In November 2021, Bank of America analyst Ryan Greenwald downgraded EVgo to “underperform” and said the stock was benefiting from “charging euphoria” among traders, which had overly inflated the company’s share price. Shares were trading for more than $16 a pop at the time, and Greenwald slashed his price target from $17 to $11. That bearishness proved justified, with the stock closing at $6.27 on Jan. 27. EVgo’s short interest is currently about 39% of its float. Bank of America still has an “underperform” rating for EVGO stock and has cut its target to $7.
Nikola Corp. (NKLA)
Electric vehicle stocks have been battlegrounds for short sellers in the past two years, and Nikola is one of the most controversial EV stocks of all. Nikola founder Trevor Milton left the company in September 2020, following allegations by short seller Hindenburg Research that Nikola was spreading “an ocean of lies” about its products. In October 2022, Milton was found guilty of three counts of fraud. Nikola shares are down 88% in the past two years ending Jan. 27, but short sellers apparently see more downside ahead. Nikola’s short interest is 26% of its float, according to Ortex.
Beyond Meat Inc. (BYND)
Plant-based meat company Beyond Meat had a disastrous 2021, and things went from bad to worse in 2022. In October, Beyond Meat announced a 19% reduction of its workforce and cut its full-year sales guidance by 16.6%. Third-quarter revenue was also down 22.5%. The stock is down 84% in the past three years, and short sellers smell blood in the water. Beyond Meat investors were once betting on a growth stock with a massive addressable market, but short sellers see an unprofitable company with negative growth in an increasingly competitive market. Beyond Meat’s short interest is about 38% of its float.
Cricut Inc. (CRCT)
Cricut makes smart machines used for crafting and do-it-yourself projects. The company priced its May 2021 IPO at $20 per share, and the stock has since lost more than half its value. In November, Cricut announced impressive 30% total user growth and 35% paid subscriber growth. But short sellers likely focused more on the company’s 32% drop in revenue. Still, unlike many recent IPOs that short sellers have targeted, Cricut has reported 15 consecutive profitable quarters, and a rebound in revenue growth could trigger a major short squeeze. Ortex estimates about 24% of the company’s float is currently held in short positions.
Stronghold Digital Mining Inc. (SDIG)
Stronghold Digital Mining is a Bitcoin (BTC) mining firm. The company operates roughly 25,900 crypto mining computers. Stronghold went public via an IPO in October 2021 during the cryptocurrency boom, but that boom turned to a bust during 2022’s crypto winter. Stronghold shares peaked at a post-IPO closing price of $33.26 on Nov. 2, 2021, but have since dropped down to close at $0.61 on Jan. 27. Stronghold’s short interest has grown to about 27% of its float.
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 about $9. After trading as high as $31.96 during the peak of the Reddit trading craze in early 2021, Fisker shares have dropped all the way back down to $7.84 as of Jan. 27. The stock took a hit in December 2022 after short seller Fuzzy Panda Research said Fisker is facing liquidity issues, claims Fisker subsequently denied. Fuzzy Panda isn’t the only short seller that could get burned by a short squeeze. Fisker’s short interest is up to 37% of its float.
Blink Charging Co. (BLNK)
Blink Charging owns and operates EV charging equipment. In November 2020, short seller and Citron Research editor Andrew Left called Blink a “total scheme” and a “joke” and said shares were worth less than $10. At the time, the stock had rallied from $2 to around $28 in a matter of months, and momentum ultimately pushed Blink shares as high as $64.50 in January 2021. The stock has since traded back down to close at $14.13 on Jan. 27. Blink reported impressive 169% year-over-year revenue growth in the third quarter, but net losses also increased 67%. Blink’s short interest has grown to about 31% of its float.
Danimer Scientific Inc. (DNMR)
Danimer Scientific produces biodegradable and compostable plastics. Danimer has certainly been a popular and successful trade for short sellers up to this point. The company went public via a SPAC merger in December 2020 at a price of around $23 per share, but it closed at $2.45 on Jan. 27. In December 2021, Danimer celebrated its one-year anniversary on the public market by announcing plans to sell $175 million in debt, news that understandably sent the stock tumbling. In its November 2022 earnings report, Danimer said it has “several significant expected customer product launches” coming in the months ahead, but short sellers remain skeptical. Ortex estimates about 20% of Danimer’s float is held in short positions.
Chicken Soup for the Soul Entertainment Inc. (CSSE)
Chicken Soup for the Soul Entertainment is an advertising-supported, video-on-demand company. It is the parent company of the Crackle and Chicken Soup for the Soul streaming services, and it recently acquired video rental kiosk provider Redbox Entertainment for $370 million. Chicken Soup bulls see value in Redbox’s 36,000 movie rental kiosks and 40 million loyalty program members, but short sellers likely see a dying DVD business that recently warned investors there would be “substantial doubt” Redbox could remain a going concern if the buyout had fallen through. Chicken Soup for the Soul’s short interest is now about 11% of its float.
9 short squeeze stocks that could take off in February:
— EVgo Inc. (EVGO)
— Nikola Corp. (NKLA)
— Beyond Meat Inc. (BYND)
— Cricut Inc. (CRCT)
— Stronghold Digital Mining Inc. (SDIG)
— Fisker Inc. (FSR)
— Blink Charging Co. (BLNK)
— Danimer Scientific Inc. (DNMR)
— Chicken Soup for the Soul Entertainment Inc. (CSSE)
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9 Short Squeeze Stocks That Could Take Off in February originally appeared on usnews.com
