Investing

Why 5 of the Most Crowded Short Sale Stocks Could Be Ready to Explode Higher

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While it seems like a million years ago now, who can ever forget the incredible rise of GameStop (and other highly shorted stocks) starting in January of 2021 and again later that year? A stunning 140% of the company’s float had been sold short by hedge funds and short sellers. It was noted later by Goldman Sachs that more than 100% of a company’s float being sold short had only happened 15 times in the prior 10 years.
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When investors, both large and small, started to buy GameStop and push the price higher, the trading action snowballed and the stock, which had been trading for years in the $1 to $2 range, exploded higher as the massive amount of shorts were forced to cover their short-sale positions by buying the stock to replace their borrow. By January 28, the stock had exploded to an intra-day high of a stunning $500 (split-adjusted to $125).

By the middle of February, all the gains were given back, but by then the damage had long since been done. Reddit’s WallStreetBets crowd, which started buying the stock anywhere from $2 to $10 in early January, poured on the pressure and the massive 140% of float acted as a parabolic rocket, moving the stock to a (split-adjusted) intra-day high of $120.75 by the 25th of January, and by 15th of February, it closed back at $10.15.

Some hedge funds and active short sellers were ruined, and all-in it was reported that short sellers at the time lost a stunning $6 billion. While that kind of incredible short-squeeze is a one-in-a-million play, there are others out there that could be ready to explode. We ran our 24/7 Wall St. short interest screens to find the stocks that had the highest current short interest. We then screened for the stocks that had positive fundamentals and were Buy rated across Wall Street. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

All short interest totals are from June 15, 2023.

Carvana

This stock was a high-flier that has come back to earth and offers big upside potential. Carvana Co. (NASDAQ: CVNA) operates an e-commerce platform for buying and selling used cars in the United States.

The company’s platform allows customers to research and identify a vehicle; inspect it using the company’s 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices.

With a stunning 57% of the float sold short, more positive news could push the shares higher. Piper Sandler’s price target of $21 is above the consensus target of $14.58 but below Thursday’s closing print of $25.74, which was down over 8% for the day.

Novavax

This small biotech stock has taken investors on a roller-coaster ride over the past three years but could be ready for a big move higher. Novavax Inc. (NASDAQ: NVAX) promotes improved health by discovering, developing and commercializing vaccines to protect against serious infectious diseases. It offers a vaccine platform that combines a recombinant protein approach, nanoparticle technology and its patented Matrix-M adjuvant to enhance the immune response.
Novavax focuses on urgent health challenges, which is evaluating vaccines for COVID-19 and influenza, as well as COVID-19 and influenza combined. The company is commercializing a COVID-19 vaccine, NVX-CoV2373 under the brand names of Nuvaxovid, Covovax and Novavax COVID-19 Vaccine, Adjuvanted for adult and adolescent populations as a primary series and for both homologous and heterologous booster indications. It is also focusing on product candidates for respiratory syncytial virus and malaria.

The company has 36% of the float sold short. H.C. Wainwright has a $35 target price, while the consensus target is $22.00. The stock closed on Thursday at $7.59.
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C3ai

This stock exploded higher after the initial public offering in 2021 and proceeded to give it all back, but interest in artificial intelligence (AI) has turned the stock around. C3.AI Inc. (NYSE: AI) operates as an enterprise AI software company in North America, Europe, the Asia Pacific and elsewhere.

The company’s C3 AI platform is an application development and runtime environment that enables customers to design, develop and deploy enterprise AI applications. It offers C3 AI Ex Machina for analysis-ready data; C3 AI CRM, an industry-specific customer relationship management solution; and C3 Generative AI Product Suite that enables customers to locate, retrieve and present information.

The company also offers these C3 AI applications:

  • C3 AI Inventory Optimization, a solution to optimize raw material, in-process and finished goods inventory levels
  • C3 AI Supply Network Risk, which identifies emerging inbound and outbound risks across the network
  • C3 AI Sustainability Suite, which helps to decrease greenhouse gas emission
  • C3 AI Production Schedule Optimization, a solution for scheduling production
  • C3 AI Financial Services Suite, which helps to minimize compliance risks
  • C3 AI Energy Management solution

In addition, it offers integrated turnkey enterprise AI applications for oil and gas, chemicals, utilities, manufacturing, financial services, defense, intelligence, aerospace, health care and telecommunications.

It has strategic partnerships with Baker Hughes in the areas of oil and gas market; Booz Allen to provide solutions to government, defense and intelligence sectors; Raytheon; and AWS, Google and Microsoft

Over 35% of its float is sold short. The Wedbush target price is $50. The $26.89 consensus target is less than Thursday’s $35.90 closing share price.

Lovesac

This company with the very confusing name is well liked across Wall Street and has a big short position that could launch it higher. Lovesac Co. (NASDAQ: LOVE) designs, manufactures and sells furniture.
Lovesac offers Sactionals, such as seats and sides; Sacs, including foam bean bag chairs; and other products comprising drink holders, Footsac blankets, decorative pillows, fitted seat tables and ottomans. The company markets its products primarily through its website, as well as showrooms at top-tier malls, lifestyle centers, mobile concierges, kiosks and street locations in 40 states of the United States; and in store pop-up shops and shop-in-shops.
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Over 34% of the company’s float has been sold short. The $64 D.A. Davidson target price compares with a $52.67 consensus target. Thursday’s $26.71 close was up over 3% on the day.

Mobileye Global

This was one of the few successful IPOs from 2022, but it has been hammered to very attractive levels. Mobileye Global Inc. (NASDAQ: MBLY) engages in the development and deployment of advanced driver assistance systems (ADAS) and autonomous driving technologies and solutions worldwide.

Its Driver Assist includes ADAS and autonomous vehicle solutions that covers safety features, such as real-time detection of road users, geometry, semantics and markings to provide safety alerts and emergency interventions. Cloud-Enhanced Driver Assist is a solution for drivers with interpretations of a scene in real-time. Mobileye SuperVision Lite is a navigation and assisted driving solution, while Mobileye SuperVision is an operational point-to-point assisted driving navigation solution on various road types and includes cloud-based enhancements, such as road experience management.

The company also provides Mobileye Chauffeur, a generation solution, and Mobileye Drive, a self-driving system consisting of radar and lidar subsystems.

With 31% of the float short, this stock could be poised to take off. Canaccord Genuity has set its target price at $50. The consensus target is $47.37 and Thursday’s closing trade was for $37.72 a share.


Will any of these explode like GameStop? Probably not, as the short interest is nowhere near the astonishing 1,540% of the float short that started that parabolic explosion. Yet, these are some very solid names, and with any degree of good news concerning either earnings or corporate development, they could have some serious potential.

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