In the dynamic world of stock markets, investors seek opportunities to capitalize on market movements. Indeed, one approach that has become popular is the short squeeze strategy, known to yield returns for investors in a short span, with retailer GameStop (NYSE: GME) being a perfect example.
As the new year approaches, several stocks are offering an opportunity for short squeezing while presenting what can be considered compelling reasons why they might be prime candidates for a significant uptick in the coming weeks. Therefore, the following are two stocks likely to experience short squeezing in January 2024.
Taiwan Semiconductor Manufacturing Company
The semiconductor industry, a key driver of technological progress, witnessed a 2023 boom spearheaded by Nvidia (NASDAQ: NVDA), pushing the company’s market cap beyond the $1 trillion mark. In contrast, Taiwan Semiconductor Manufacturing Company (NYSE: TSM) stock did not experience the same level of success. Peaking at nearly $730 billion in early 2022, TSM’s market cap suffered a significant decline as chip demand subsided in 2022, impacting its financials throughout 2023.
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Despite these challenges, TSM has demonstrated robust earnings growth and an expanding customer base, positioning itself to meet the growing demand for artificial intelligence (AI), machine learning, and Internet of Things technologies. With global semiconductor manufacturing projected to surge, TSM is well-positioned to benefit from this industry uptick.
TSM’s resilience and strategic positioning make it a stock to watch in January. The company’s strategic U.S. investments, including a chip plant in Arizona, signal a commitment to becoming a crucial source of vital chips. Competing with industry giants like Samsung and Intel (NASDAQ: INTC), TSMC maintains a neutral stance, appealing to major clients like Apple (NASDAQ: AAPL), who prefer to avoid direct competitors.
Given the continued integral role of technology in various sectors, the demand for semiconductors is expected to remain high, providing TSM with a solid foundation for growth. For example, Taiwan Semiconductor is ramping up the production of 3 nm chips, with plans to introduce 2 nm products in 2025.
In the context of short squeezes, TSM saw a spike in short interest in August 2023 amid Nvidia’s rally.
On another front, eight Wall Street analysts from TipRanks strongly recommend TSM as a ‘strong buy.’ Their projections are grounded in the stock’s performance over the last three months. Looking ahead to the next 12 months, the analysts have assigned TSM an average price target of $112, with a high forecast of $130 and a low forecast of $85. This average price target signifies an 8.58% change from the last price of $101.95.
By the close of markets on December 22, TSM was valued at $103.15, reflecting a year-to-date gain of almost 40%.
Carvana (NYSE: CVNA), the online used car retailer, has recently navigated a rollercoaster ride, but the stock has traded in the green zone across 2023. Indeed, positive comments from JPMorgan Chase (NYSE: JPM) analysts have partially sparked further optimism about the company’s future. The bank upgraded Carvana’s stock from underweight to neutral, along with a raised price target.
Indeed, CVNA has skyrocketed by over 1000% in 2023, with the spike mainly attributed to a short squeeze.
With a strategic plan in place and focusing on navigating uncertainties in the macro and used car industry, Carvana aims to limit downside risks to near- and medium-term estimates. The upbeat outlook, especially in the face of challenges such as rising interest rates and fluctuating used car prices, has renewed confidence among investors that the gains might be sustainable.
Indeed, the development was crucial as it reassured investors that the stock, which had plummeted to 99% from its 2021 peak due to slowing growth and mounting losses, could potentially avoid plunging further.
Carvana’s resilience in bouncing back and reassuring investors positions it as a potential candidate for further short-squeeze scenarios. As the company executes its strategy and adapts to industry changes, it has the potential to positively surprise the market.
As reported by Finbold, the Carvana stock was facing a potential short squeeze due to “inverse head and shoulders” – a chart pattern typically seen as a bullish reversal signal.
Based on 16 Wall Street analysts from TipRanks offering 12-month price targets for Carvana in the last three months, the average price target is $39.23, with a high forecast of $62 and a low forecast of $24. This average price target represents a 28.33 % drop from the last price of $57.74.
Currently, the stock is valued at $54.74, with YTD gains of 1,080%.
Notably, although the mentioned stock has the potential for a short squeeze, it is not guaranteed that the trading pattern will be witnessed in January, considering that a myriad of factors influence the stock market.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.