NAKD Stock: Retail Investors Bet on a Naked Brand Short Squeeze as Shares Surge

Today, it appears the meme-stock rally isn’t dead. Some high-profile comments from pundits like Jim Cramer on CNBC yesterday appear to have rubbed Redditors the wrong way, causing them to buy shares of companies like Naked Brands (NASDAQ:NAKD). Today, they’re out buying NAKD stock en masse.

a man and woman wear plain white underclothes from Naked Brand (NAKD)
Source: Shutterstock

Cramer said on his program, “Once the speculators are blown out … and the stocks that are already down huge start rallying, then we can find a tradeable bottom. … We’re close, but the speculators haven’t been fully crushed yet.”

Today, the highest-profile meme stock right now AMC Entertainment (NYSE:AMC) is currently up 13%. Contrary to Mr. Cramer’s opinion, it appears retail investors have found the dry powder necessary to drive meme-stock prices higher.

One other stock that’s pursuing meme-stock status of late is, of course, Naked Brands. This embattled intimates retailer has seen its share price surge more than AMC’s. Currently, shares of NAKD stock are up more than 16% at the time of writing.

Let’s dive into why this is the case today.

Retail Investor Optimism Around Short-Squeeze Plays Driving NAKD Stock Higher

Naked Brands is a company that’s been in hot water lately. The pandemic has hit the company’s core physical retail operations hard. However, in the midst of a shift toward e-commerce, NAKD stock had seen some signs of life earlier this year.

That said, in recent months, like other meme stocks, NAKD stock lost momentum. The company’s share price has fallen from a high of $3.40 per share during peak meme-stock mania in late January to below 50 cents as of yesterday.

That said, once again, meme-stock investors are targeting this company as a potential turnaround stock with lottery-ticket-like returns. The company’s short volume ratio of 33% suggests there’s room for a squeeze. Indeed, this is one of the most highly shorted stocks on the market. Combine this fact with the reality that NAKD stock is a penny-stock play, and investors can see dollar signs in a squeeze-like scenario.

Whether we see another move to $3 per share or higher remains to be seen. However, these longshot bets are being viewed favorably once again. Perhaps in the near term this stock could see some momentum. However, investors need to remember that this is a troubled retailer with a rather unpleasant-looking balance sheet. Invest accordingly.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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