From GameStop (NYSE:GME) to AMC Entertainment (NYSE:AMC), the WallStreetBets community has fueled explosive gains in meme stocks with questionable fundamentals. Driven by social media hype, the virtual showdown between retail traders and institutional investors has repeatedly identified massive short-squeeze stocks.
Newer investors may be asking, what is a short squeeze? As Travis Box, Ph.D., assistant professor of Finance at Clemson University, wrote in an email to InvestorPlace, “Short sellers seek to buy the stock at a low price and sell it for a higher price. The only difference is that the typical order of these transactions has been reversed so the trader will sell first and buy it back later. … The ‘squeeze’ occurs when rising prices force some short sellers to cover their positions by buying back shares, causing prices to rise further, which leads to more … short sellers covering and at even higher prices.”
While most institutional investors may argue that these meme stocks are merely a joke, the trend has proved to hold strong over the first half of 2021. A handful of popular short-squeeze stocks seem to be once again on the move in recent weeks. Retail traders rely on the power of collective knowledge before selecting the next company to rush into. It wouldn’t be surprising to see more risk-tolerant investors joining them to get a piece of the action as well. Therefore today, I’ll discuss seven short-squeeze stocks that may generate generous returns in the near term.
It is crucial to remember that these stocks are highly volatile. They may not be suitable candidates for most portfolios long term, as some of them have shaky fundamentals. With that in mind, here are seven short-squeeze stocks that could generate significant WallStreetBets buzz in August.
- AMC Entertainment
- Clover Health (NASDAQ:CLOV)
- Globalstar (NYSEAMERICAN:GSAT)
- Nokia (NYSE:NOK)
- Pitney Bowes (NYSE:PBI)
- PubMatic (NASDAQ:PUBM)
- Tattooed Chef (NASDAQ:TTCF)
Short-Squeeze Stocks: AMC Entertainment
52 week range: $1.91 – $72.62
Leawood, Kansas-based AMC Entertainment is the largest movie theater chain in the U.S., with more than 11,000 screens in 15 countries. It has been making headlines as a top meme stock in recent weeks. It’s also one of the top short-squeeze stocks right now.
AMC reported first-quarter financial results in May. Revenue fell about 84% year-over-year (YOY) to $148 million. Net loss came in at $567 million, an improvement compared to -$2.18 billion in the prior-year period. The company burned through $313 million in cash in the first quarter.
Retail traders joined forces in June to bid up AMC shares, boosting its stock price at one point by over 3,000%. The company’s short squeeze momentum, however, seems to be fading away. AMC shares plunged over 30% in July, currently hovering in $37 territory. Yet, AMC stock remains up around 1,600% year-to-date (YTD).
This incredible boost in its stock price allowed AMC management to raise $1.2 billion in cash through equity offerings in recent weeks. Yet the company faces $5.5 billion in long-term debt as opposed to $2 billion in total liquidity.
At its current price-sales (P/S) ratio of 15.7, AMC stock looks significantly overvalued for an unprofitable entity in an industry that faces competition from streaming giants like Netflix (NASDAQ:NFLX). However, retail traders may not necessarily be ready to give up on one of their favorite names just yet.
Clover Health Investments
52 week range: $6.31 – $28.85
Clover Health is a healthcare technology company that operates as a Medicare Advantage insurer. Clover Assistant, its flagship software platform, analyzes health and behavioral data to provide seniors with affordable health care plans. In addition, the platform claims to offer physicians data-driven insights to enhance decision-making.
The group issued first-quarter results in mid-May. Revenue came at at $200.3 million, a 21% year-over-year (YOY) increase from $165.5 million. But net loss soared from $28.2 million to $48.4 million, primarily due to increases in pandemic-related expenses. Cash and equivalents came at $720 million.
CFO Joe Wagner cited, “In the first quarter we delivered a record-setting $200 million in revenue, which was quickly followed by the launch of our Direct Contracting Entity. Notably, the Clover Assistant continues to power improved financial outcomes.”
The company announced on June 24 that it is planning to double the company’s geographic footprint by expanding into 101 new markets. The expansion will likely allow even more seniors to gain access to Clover’s high-value and affordable plans.
However, analysts are concerned that the business model has inherent sustainability issues. In a highly competitive Medicare market, Clover pays out much of its revenue in expenses to retain its main customer segment of physicians.
CLOV stock hit an all-time-high (ATH) of $28.85 on June 9 during the peak of its meme-stock frenzy. The shares currently hover at $8, down 51% YTD. The stock has declined almost 36% in the past 30 days. But the show is not likely to be over for wild moves in the healthcare group.
Short-Squeeze Stocks: Globalstar (GSAT)
52 week range: $0.29 – $2.98
Telecommunications group Globalstar company provides mobile satellite services to customers where terrestrial wireline and wireless communications networks might be impaired or do not exist. It focuses on selling capacity on its constellation of low-orbit satellites.
The company announced first-quarter financial results in May. Revenue declined by 16% YOY to $26.93 million. Net loss was $ 36.33 million, down $1.9 million. Diluted loss per share was flat at 2 cents. Cash stood at $8.4 million.
On the results, CEO Dave Kagan noted, “…we announced the completion of the second lien warrant exercises. … Down from the initial first lien principal balance of almost $600 million, we now only have a net principal balance of $84 million remaining, most of which is not due until the final maturity date in December 2022.”
Investment bank B. Riley Financial (NASDAQ:RILY) started coverage of GSAT stock with a “buy” rating and a $3.25 price target in late June, more than double its stock price at the time. The stock instantly soared almost 18%, followed by another surge of 23% on the next trading day.
The stock currently hovers around $1.40, up 320% YTD. Given current optimism among investors and its meme stock status, GSAT stock could see further volatility in the months to come. P/S and price-to-book (P/B) ratios stand at 19.4 and 5.9, respectively.
52 week range: $3.21 – $9.79
Once a big mobile telephone group, Nokia now mainly provides telecom equipment. Its network business generates revenue from selling wireless and fixed-line hardware, software and services. Nokia’s technology segment also licenses its patents to manufacturers worldwide, collecting royalties and creating value with its intellectual property.
The group reported Q1 results in early May. Revenue of 5.08 billion euros increased 9% YOY in constant-currency terms. Net earnings stood at 263 million euros compared to a net loss of 115 million euros a year ago. Cash and equivalents came at 3.7 billion euros.
CEO Pekka Lundmark, who was pleased with the metrics, cited, “Today’s results demonstrate that we are on track to deliver on our three-phased plan to achieve sustainable, profitable growth and technology leadership.”
Management has highlighted that 2021 is a year of transition for the company. It is enroute to growing the 5G business and upgrading cloud and network services. Nokia has already finalized more than 160 commercial 5G deals in addition to a large number of live 5G network deployments.
But I must remind readers that Nokia faces strong competition in the 5G market from Samsung, Huawei, and Ericsson (NASDAQ:ERIC). The current global semiconductor shortage is also likely to impact the network equipment sales throughout the rest of 2021.
NOK stock surged in mid-July after the company raised its previous 2021 sales guidance. The shares currently hover around $6 territory, up 56% YTD. Its forward price-to-earnings (P/E) and P/S ratios currently stand at 18.7 and 1.25, respectively. The company could potentially start making headlines as a top short-squeeze name.
Short-Squeeze Stocks: Pitney Bowes (PBI)
52-week range: $3.12 – $15.50
Stamford, Connecticut-based Pitney Bowes provides mailing and commerce solutions for 90% of the Fortune 500 businesses. Primary services include cross-border e-commerce logistics, digital shipping services, and customer information management.
Q1 earnings results showed that revenue increased 15% YoY to $915 million. The bottom line, however, was in the red, and net loss came at $31.6 million. Adjusted EPS was 7 cents, up from 5 cents a year ago. Cash and equivalents ended the quarter at $681 million.
On the quarterly metrics CEO Marc B. Lautenbach cited, “Revenue continued to demonstrate strong growth, every business improved its EBIT performance from [the] prior year, and we strengthened our balance sheet.”
Investors seem to be taking a closer look at Pitney Bowes’ valuation metrics. PBI stock soared as much as 20% in early July after it was announced that Stamps.com (NASDAQ:STMP), a Pitney Bowes competitor, is being acquired at a significant premium by a private equity company. The deal values Stamps.com at around $6.6 billion, over eight times its revenue over the past 12 months. By comparison, Pitney Bowes trades at less than one times revenue.
PBI stock surged more than 50% in late January during the short squeeze frenzy. The stock then plunged in early February despite strong sales results. PBI stock currently hovers around $8.50, up almost 38% YTD. Its forward P/E and current P/S ratios stand at 24 and 0.39, respectively. A bid for Pitney Bowes could also be in the works in the coming quarters.
52 week range: $22.42 – $76.96
PubMatic is an advertising technology company whose platform enables real-time programmatic advertising transactions. The company went public in December 2020.
PubMatic released Q1 financial results in May. Revenue went up to $43.6 million, an increase of 54% YOY. Additionally, the company reported a 72% gross margin. Investors regard this as a positive for long-term earnings growth. Net income of $4.9 million represented an increase of 444% YOY. Diluted EPS was 9 cents.
CEO Rajeev Goel highlighted, “Our omnichannel platform fueled growth across all segments of our customer base and all formats we serve, particularly in video and OTT/CTV. Our execution, combined with the economic re-opening and expected acceleration of digital advertising, gives us confidence to raise our full year outlook for 2021.”
Analysts note that the industry that has a favorable growth outlook. Customers of PubMatic’s tech platform are substantially increasing their spending. As the company further expands its customer base, the prospects for long-term growth remain promising.
PUBM stock has surged 15% YTD and hit a record high in early March. It currently hovers around $32.50, down around 55% from its high in March. PUBM stock could be appropriate for risk-tolerant investors willing to take on short-term volatility. Forward P/E and P/S ratios stand at 103 and 9.7, respectively.
Short-Squeeze Stocks: Tattooed Chef (TTCF)
52 week range: $13.60 – $28.64
Even if you do not yet own TTCF stock, if you include plant-based food products in your diet, you are likely to have heard of Tattooed Chef. Its food products are commonly available in the frozen food sections of grocery stores.
Tattooed Chef issued first-quarter results in May. Revenue surged 59% YOY to $52.7 million. But net loss was $7.9 million, compared to a net income of $5.9 million in the prior-year period. Cash and equivalents came at $185 million. CEO Sam Galletti believes the earnings report “demonstrates the strength of our business and the Tattooed Chef brand.”
The company’s store presence increased 41% to 6,065 stores during the first quarter. Management hopes to achieve its 2021 objective of 10,000 stores by the end of this year.
In early May, the company acquired Karsten Tortilla Factory and New Mexico Food Distributors. Tattooed Chef plans to grow its market share in the $1 billion Frozen Mexican Food category. Investors are excited that the new acquisitions could lead to solid foothold in the “Hispanic/Southwest” food segment, which is worth around $20 billion.
TTCF shares have high short interest, standing at nearly 25% of float. Market analysts suggest the stock has significant potential to become a short squeeze candidate among retail investors.
TTCF stock hovers around $20 territory. The stock is down around 13% so far this year. The shares currently trade at a multiple of 9.5x current sales. It deserves to be on your watch list of short-squeeze stocks.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.