So we all know that short squeezes have been among the most popular and controversial topics in the past couple of years. So I wanted to compile a short list of potential short squeeze stocks, and why I think they're worth trying.
Beyond Meat Inc. (BYND)
Plant-based meat company Beyond Meat has had a disastrous couple of years, and 2023 is no exception. Beyond reported a 30.5% year-over-year drop in revenue in the second quarter, its fourth consecutive quarter of double-digit sales declines. The stock is down 91% overall 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 over 37% of its float.
Velo3D (VLD)
Velo3D is a 3D printing company that went public via a special purpose acquisition company merger in September 2021 at around $8.80 per share, and it has since dropped to below $1.60. Velo3D reported 28% revenue growth and record new customer demand in the second quarter. However, short sellers likely focused on the company's full-year revenue guidance cut and $23 million net loss compared to a net profit of $128 million a year ago. A surprise profit could trigger a sizable short squeeze for Velo3D. Ortex estimates about 15% of Velo3D's float is held in short positions.
Hyzon Motors (HYZN)
Hyzon Motors is a hydrogen mobility company focused on designing, developing and producing standalone and integrated hydrogen fuel cells and systems, as well as hydrogen-powered commercial vehicles. Hyzon went public via a special purpose acquisition company merger in July 2021 at a price of $9.70, but it has since dropped more than 85%. In June, Hyzon said it had strengthened its governance and identified “material weaknesses in controls and procedures.” In August, Hyzon reported a second-quarter net loss of $60.2 million. Meanwhile, the stock's short interest is up to 14% of its float.
SmileDirectClub (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 four years later it is now down more than 99% to less than 50 cents and is at serious risk of being delisted from the Nasdaq. Meanwhile, SmileDirectClub has still not reported a single profitable quarter as a public company. Ortex estimates more than 22% of SmileDirectClub’s float is held in short positions.
AirSculpt Technologies (AIRS)
AirSculpt Technologies provides next-generation body contouring treatments that use a minimally invasive procedure to remove fat, tighten skin and reshape targeted areas of the body. AirSculpt went public in October 2021 at an IPO price of $11 per share, and the stock remains well below its IPO price. In August, AirSculpt reported second-quarter revenue of $55.7 million, up 12.2% from a year ago. The company also reiterated full-year revenue guidance of between $187 million and $192 million. The stock is up 111% year to date, but short sellers aren't buying the rally. AirSculpt's short interest is nearly 23% of its float.
In summary, while the allure of a short squeeze can be tempting for retail investors, it's crucial to approach these stocks with caution. From struggling startups like Velo3D and Hyzon Motors, to companies facing serious financial downturns like Beyond Meat and SmileDirectClub, each of these companies presents a set of unique risks and opportunities. The high short interest in these stocks suggests that they could be primed for a short squeeze, but it's essential to remember that the fundamentals are a critical aspect to consider. Always remember, investing in stocks with high short interest is not for the faint of heart, but for those willing to give it a shot, the rewards could be substantial.
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