These stocks are primed for a short squeeze.
Short squeezes have gotten a lot of attention in 2021. Groups of retail traders on Reddit and other social media platforms have successfully orchestrated targeted buying campaigns in some of the most heavily shorted stocks in the market, repeatedly triggering massive short squeezes throughout the year. Short squeezes are large, short-term spikes in a stock's share price that occur when short sellers are forced to exit their positions all at once by covering, or buying back, shares of stock. Here are eight stocks that have all the ingredients to be the next major short squeeze, according to Ortex Analytics.
Smiledirectclub Inc. (ticker: SDC)
Smiledirectclub has been one of the most heavily shorted stocks in the market since it completed its high-profile initial public offering in 2019. One of the reasons Smiledirectclub is such a popular short bet is that it's been such a successful trade for short sellers up to this point. The company went public at a price of $23 per share, but roughly two years later it is now trading under $6. Ortex estimates that 46.4% of Smiledirectclub's float, or free-trading shares, is held in short positions, the highest percentage of any stock on this list.
Progenity Inc. (PROG)
Progenity supplies molecular and specialized diagnostic tests for clinicians. Like Smiledirectclub, Progenity has been a home run trade for short sellers since it completed its IPO at a price of $15 per share in June 2020. Less than 16 months later, the stock is trading at just $1.34, and short sellers are betting the long-term downtrend continues. Ortex estimates 44.6% of the stock's float is currently held in short positions, making it an excellent candidate for a short squeeze. Since Progenity completed a $40 million equity capital raise in August, the stock is up 60%, pressuring short sellers.
Aterian Inc. (ATER)
Aterian identifies top-selling product categories on Amazon.com Inc. (AMZN) and partners with or acquires companies that produce those goods. Aterian shares have been extremely volatile in 2021. Aterian achieved "meme stock" status when it rocketed from under $7.50 in December 2020 to as high as $48.99 in February 2021. After crashing back down to around $3 by August, the stock experienced another major squeeze that sent it back up to $19 within a matter of weeks. Aterian's short interest was under 10% of its float to start the year, but that figure is now up to 44.5%.
Workhorse Group Inc. (WKHS)
Electric vehicle stocks have been popular targets for short sellers in the past year, and Workhorse shares are down 71.4% in that time. Much of that sell-off occurred after the U.S. Postal Service chose competitor Oshkosh Corp. (OSK) over Workhorse for a crucial $6 billion next-generation delivery vehicle contract. Workhorse dropped its lawsuit over the USPS contract in September. Shortly thereafter, Workhorse recalled 41 of its C-1000 electric delivery vans and suspended deliveries. Market expectations are now extremely low for Workhorse, so any positive news could ignite a short squeeze. Workhorse's short interest is 39.4% of its float.
Canoo Inc. (GOEV)
Canoo is another EV stock that has struggled mightily since going public via a reverse merger in December 2020. At the time of the merger, Canoo shares were trading at $22.80. Less than a year later, the stock is trading at just $7.67, making it a big win for short sellers up to this point. Canoo bounced in September after it gained popularity as a short squeeze play in Reddit's popular WallStreetBets community. Canoo's short interest has risen from just 8.6% of its float in late February to 36% today, setting the table for a potential squeeze.
AppHarvest Inc. (APPH)
Agriculture technology stock AppHarvest went public via a merger with a special purpose acquisition company in February. The stock opened above $35 on its first day of trading. Eight months later, AppHarvest shares are priced at around $6.50, and the stock has been a major money-maker for short sellers. In August, AppHarvest shares plummeted 44% in one day when the company reduced the midpoint of its 2021 revenue guidance from $22.5 million to $8 million. Since February, AppHarvest's short interest has grown from around 3.5% of its float to 35.7% of its float, according to Ortex.
Cassava Sciences Inc. (SAVA)
Cassava Sciences is a biotech stock developing potential Alzheimer's disease treatment simufilam. Cassava recently reported cognition improvement in 50 patients with mild to moderate disease who received simufilam for a period of 12 months. Unfortunately, short sellers have questioned the integrity of the clinical trials. The stock is down 12.2% since the data was reported, but it remains up more than 800% overall year to date. If simufilam proves to be an effective treatment for Alzheimer's, Cassava could be the mother of all short squeezes. Ortex estimates that 34.3% of the company's float is currently held in short positions.
Gogo Inc. (GOGO)
Gogo provides broadband connectivity to the aviation industry. Gogo shares are up 74% year to date in 2021, but most of that gain has come since the company raised its long-term revenue growth guidance on Sept. 28. Gogo is now projecting 15% annual revenue growth from 2020 to 2025, up 50% from its previous forecast of at least 10% annual growth. Gogo is expecting to complete construction of its 5G network by 2022. However, the stock will likely remain volatile and highly exposed to the ongoing pandemic and its impact on business travel. Gogo's short interest is 32.9% of its float.
Short squeeze stocks that could take off in October:
— Smiledirectclub Inc. (SDC)
— Progenity Inc. (PROG)
— Aterian Inc. (ATER)
— Workhorse Group Inc. (WKHS)
— Canoo Inc. (GOEV)
— AppHarvest Inc. (APPH)
— Cassava Sciences Inc. (SAVA)
— Gogo Inc. (GOGO)