Short-covering has become one of the hottest buzzwords of the year after Reddit forum, WallStreetBets, drove a monster rally in heavily shorted shares of Gamestop (NYSE:GME) from $11 to $483 in days.
“Rising short interest can be a red flag for investors that something is seriously wrong with a company. However, it can also set up a stock like GameStop for a major short squeeze. A short squeeze is a large, short-term spike in a stock’s share price triggered when a large number of its short sellers are forced to exit their positions all at once by buying shares of stock,” as pointed out by U.S. News & World Report contributor Wayne Duggan.
In fact, here are some of the top, most shorted stocks to keep an eye on.
- Blink Charging Co. (NASDAQ:BLNK)
- Arcimoto Inc. (NASDAQ:FUV)
- Second Sight Medical Products Inc. (NASDAQ:EYES)
- Root Inc. (NASDAQ:ROOT)
- Ontrak Inc. (NASDAQ:OTRK)
Most Shorted Stocks: Blink Charging Co. (BLNK)
At $39.35, Blink Charging Co. is one of the most heavily shorted stocks with nearly 38% of its 30.9 million share-float sold short. It also carries a market cap of $1.65 billion, trading at 212 times sales, and 68 times book. It’s clearly overvalued and overdue for a pullback, short-term.
Longer-term, investors may want to consider Blink Charging, especially with President Joe Biden’s push for electric vehicle growth. The President even said he would “work with our nation’s governors and mayors to support the deployment of more than 500,000 public charging outlets by the end of 2030,” as I noted on April 1.
FUV is another clearly overvalued stock with a market cap of $387 million that trades at about 156 times sales and almost 26% of its 27.45 million-share float short. Technically, things are just as ugly, with the stock recently breaking below its 200-day moving average. From a current price of $11, it could retest triple bottom support around $5 next. Recent earnings weren’t hot either. In fact, the company posted a loss of 63 cents a share on sales of $2.2 million. Analysts were looking for a loss of 55 cents. That’s the bad news.
The good news – management is still bullish going forward. “As we look to the year ahead and emerge from the pandemic our course is clear,” said CEO Mark Frohnmayer, as quoted by Barron’s. “2021 is the year Arcimoto will lay the groundwork for the next decade of growth.”
At the same time, Barron’s contributor Al Root noted, “Analysts project the company will generate about $21 million in sales in 2021, up more than 850% year over year.”
At the moment, the cons outweigh the pros with FUV. I’d wait for the stock to find support before you even consider taking a position.
Second Sight Medical Products Inc. (EYES)
With a market cap of $247 million, EYES trades at 167 times sales, and 613 times book. Nearly 14% of its float is short. All after EYES stock exploded from a low of $1.40 to a recent price of $8.65 on news the U.S. Food and Drug Administration approved the company’s Argus 2S Retinal Prosthesis System.
However, Second Sight just terminated its memorandum of understanding with Pixium Vision. In return, Pixium said the action was “unilateral and wrongful,” as quoted in a company press release, saying it “will consider all measures available to preserve its rights and obtain compensation for its entire damages.” In addition, from my understanding, the Argus 2S production was subject to the deal being closed.
Root Inc. (ROOT)
Technically, ROOT is a disaster. Just a few months after trading around the $20 level, the stock is down to $11.31 and sinking fast with 18.3% short interest.
At the moment, there are arguments from both sides of the aisle on ROOT stock. What’s interesting here is that short-seller Andrew Left is bullish on the stock.
In fact, as pointed out by InvestorPlace contributor William White, Citron Researcher’s Andrew Left got bullish on the stock, noting, “We know one thing about car insurance. Even if investors’ attention turns to something else tomorrow, this is not going away. I don’t care if you’re going to drive a Tesla or which electric car you choose to drive, you’re going to have to have insurance for that particular electric car. And if Root can just get 2% of the insurance business of the market, which I think they can, you’re looking at a $50, $60, $70 stock.”
Ontrak Inc. (OTRK)
Technically, OTRK is also a disaster. Since February, the stock plummeted from a high of $99.89 to a recent low of $31.22, with short interest of 38.5%. The big reason it fell apart is because it lost one of its biggest clients, Aetna, and was forced to cut 2021 revenue guidance from $165 million to $100 million. Not helping, RBC Capital analyst Sean Dodge downgraded the stock with a new target of $32 from $82.
However, keep an eye on OTRK. Following the client loss, the company did sign a contract with LifeStance Health, which provides outpatient mental health care.
“Our new relationship with LifeStance Health is intended to address this customer need for members of our Ontrak program through the addition of more than 3,000 behavioral health clinicians, both virtually and in-person at 370 centers nationwide,” says Terren Peizer, Ontrak Chairman and CEO, as quoted in a company press release.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.