A short squeeze happens when traders who short a stock start buying it back. This increases demand for the stock and increases its price, which forces other short sellers to buy back the stock and close their position.
This can be a profitable trading strategy, which is why Finbold analyzed the most shorted stocks this year and selected the two that have a high potential to take off this September.
Beyond Meat Inc.
Beyond Meat Inc. (NASDAQ: BYND) is a plant-based meat company whose flagship product Beyond Burger, is designed to look, cook and taste like a beef burger. The company also makes Beyond Sausage, Beyond Beef, Beyond Meatballs, Beyond Steak and more.
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It has 35.58% of the float shorted, which makes it one of the top 10 most shorted stocks, as of August data.
Even though the stock has been beaten down since March of this year, Morningstar’s quantitative equity report has put a fair value estimate of $25 per share. That’s 118% above the current market price of $11.45.
This fair value price hasn’t been reached this year. If that happens, it could initiate a short squeeze.
Beyond Meat didn’t do well in the recent quarter, though, according to its Q2 report. The company cut its prices by 8.6% through discounts, but demand wasn’t there. US retail volume fell 34%, while its domestic food service volume dropped 44%.
The company’s Q2 net sales are down 30.5% with an $0.83 per share loss. This caused Beyond Meat to cut its full-year revenue outlook to between $360 and $380 million.
C3.ai
C3.ai Inc (NYSE: AI) is a pure-play AI stock where the company provides AI software solutions to businesses. Some of its portfolio includes tools for accelerating software development and reducing expenditures. The company also provides its own generative AI suite.
This company often stays among the most shorted stocks, with 34% of float shares shorted.
Despite that, the stock has had a decent run this year, wiping out some of the shorts. Morningstar’s equity report places a 17% higher value than the current market price of $31.45. However, the stock has already traded way beyond that price in the past few months.
We already called the stock’s pullback to $31.5 back in July, which is where it trades today.
The company reported its Q1 for FY2024 on Wednesday, September 6. Its revenue was $72.4 million, with a subscription revenue for the quarter of $61.4 million, but it suffered a quarterly loss of $0.9 per share.
C3.ai closed 20 agreements with companies such as Google Cloud, AWS, Microsoft, and Booz Allen Hamilton. Most of their agreements were closed via their partners network.
Beyond Meat is down 7.5% year-to-date, while C3.ai has outperformed the S&P 500’s 16% return with an 184% return during the same period.
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