Investors and analysts are always keeping a close eye on heavily shorted stocks. Why? Because there’s a potential for a financial shake-up called a short squeeze. This happens when lots of traders who bet against a stock are forced to bail out, causing the stock price to surge even higher.
To figure out which stocks might be in for this wild ride, market watchers analyze a metric known as the short-interest ratio. Simply put, it’s a measure showing how many shares are shorted compared to a stock’s usual daily trading volume.
On December 13, Finbold took a look at two popular stocks that are getting a lot of attention from short sellers, and as such, have the potential to stage a great comeback.
Picks for you
C3.ai (NYSE: AI)
Alongside the Big Tech juggernauts, one company that attracted the attention of many investors during this year’s artificial intelligence (AI) craze is C3.ai (NYSE: AI).
This is a company that provides enterprise AI software solutions, aimed at helping its clients make better business decisions through the use of advanced analytics, machine learning, and Internet of Things (IoT) data.
While C3.ai’s 2023 performance is nothing short of impressive, surging 150% year-to-date, the stock is also one of the short sellers’ favorites.
With more than 30.1% of its float being shorted currently, investors have their doubts about C3.ai’s actual prospects to capitalize on the ongoing AI boom, particularly after the company delayed its profitability target in September.
However, even though C3.ai will likely continue to face challenges in the near term – particularly when considering the intensifying competition in the AI market – it has not shown a lack of ambition.
Therefore, if the company manages to translate these aspirations into better financial performance, there is a decent probability for the stock to witness a short squeeze amid a significant short interest ratio.
Sunrun (NASDAQ: RUN)
Sunrun (NASDAQ: RUN) is a leading residential solar energy company that specializes in the design, installation, and maintenance of solar energy systems for homes. The company offers solar leasing, power purchase agreements, and financing options to make solar energy more accessible to homeowners.
It is safe to say that 2023 has been a challenging year for Sunrun’s stock, but also for the broader solar sector. Challenged by a high interest rate environment and supply chain constraints, many solar stocks saw double-digit declines this year, including RUN, which is down 46% year-to-date.
Amidst this patchy climate, RUN is also heavily shorted by investors. More concretely, over 20.8% of the stock’s float is currently shorted, according to MarketBeat data.
But, analysts largely expect the solar sector to shake off the current shackles and rebound in 2024, based on their predictions of increased demand for solar energy solutions.
If these predictions materialize and Sunrun becomes a part of that uptrend, it could capture heightened interest from bullish investors. This increased attention might prompt sellers to close their existing positions, potentially triggering a short squeeze.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
