These ‘short squeeze’ candidates are being heavily bet against
As a new meme frenzy unfolds in the market, traders are once again making bets in stocks with high levels of short interest. This activity could lead several companies to become the next targets of a short squeeze. Shares of GameStop , Reddit and Robinhood all surged on Monday after “Roaring Kitty,” the retail investor who sparked the epic short squeeze of 2021, made an online appearance for the first time in about three years. This phenomenon could mark an attempt to reignite the “meme stock” craze in a market that has made a comeback this month, as the S & P 500 has gained 3.6% while the 30-stock Dow and the Nasdaq Composite have jumped more than 4% each. Short-selling is a commonly used practice by hedge funds, although not exclusively, that occurs when investors bet against a stock by borrowing shares and then selling them to buy them back later at a lower price. Investors then return the borrowed shares and pocket the difference as profit. A short squeeze happens when a stock price surges and forces those shorting the stock to purchase shares, or cover their shorts, to buy back stock and cut their losses. That typically pushes the stock price higher still. To find the next potential short squeeze candidates, CNBC Pro used FactSet data to search for companies listed on the New York Stock Exchange and Nasdaq with a short interest as a percent of float at 25% or more, and a market cap that exceeds at least $250 million. Take a look at the names below: Solar Energy company SunPower ‘s short interest as a percent of float was recently at about 95%, the highest among all the stocks included in the screen. SunPower’s shares have plummeted more than 40% this year as solar stocks have come under pressure due to concerns about persistent inflation and high-interest rate levels, as many solar companies rely on borrowing for their growth plans. The stock climbed more than 22% on Monday, however. Another solar name, Maxeon Solar Technologies , has its short interest as a percent of float at about 45%. Shares of the company, which manufactures photovoltaic panels, have plummeted more than 65% this year and roughly 25% this quarter. The stock jumped more than 17% on Monday after Maxeon announced it will postpone the release of its fourth-quarter of fiscal year 2023 and first-quarter of fiscal year 2024 financial results from Wednesday to May 23. Vegan meat producer Beyond Meat has 41.3% of shares sold short, meanwhile. The stock has lost more than 15% year to date. After the company missed first-quarter earnings expectations last week, Goldman Sachs on Thursday maintained its sell rating on Beyond Meat and lowered its price target by 50 cents to $3.50, which implies the stock could decline roughly 51% over the next year. The Children’s Place is another short squeeze target, as 70% of its floating shares are being sold short. Shares of the beleaguered children’s apparel retailer are up more than 73% this month but are still down nearly 48% for the year. The company has been working with advisors and lenders to improve its liquidity and balance sheet and has struggled with its margins due to higher levels of promotional activity.
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