A week ago, InvestorPlace’s Chris MacDonald placed Aterian (NASDAQ:ATER) on a list of short squeeze stocks that experts considered to be “ready to pop,” noting that it “boasts a high short interest (36%) alongside a borrow-fee rate of 87%.” The data from the list was based on rankings from financial intelligence platform Fintel. Today, as the consumer product platform retained its spot as second on the short squeeze list, ATER stock has enjoyed significant gains.
What Happened With ATER Stock
Last week saw considerable turbulence for ATER stock as it dropped nearly 40% on Sept. 14. Since markets opened today, though, this pattern has shifted and the stock has climb consistently. Despite some slight downticks, shares are still up 7% for the day as of this writing.
Although last week began on a high note, with prices rising as high as $19 per share, they were quick to begin falling. This pattern isn’t surprising. Popular short squeeze favorites often capture the fascination of internet forums such as r/WallStreetBets and Twitter, whose members buy shares as a way of betting against Wall Street. That’s likely what’s happening right now. As we saw last week though, these trends often lead directly to another downturn.
Why It Matters
The artificial growth that is generated by quick-spreading internet hype has consistently proven to be a trend of which investors should be wary, unless they are evaluating a stock through a bearish lens.
Since the GameStop spike of early 2021, investment communities have recognized the power of meme stocks. There are moments when taking the contrarian approach of working against Wall Street actually helps a stock rise in price, creating value for those who chose to hold the stock rather than short it.
That seems to apply to ATER stock. Since the company became a short squeeze favorite, it’s been rocked by volatility, and long-term investors are right to be nervous. This isn’t necessarily a cause for alarm, but it’s also not a signal to relax.
What Comes Next for ATER Stock
Through it all, Aterian remains a company that is worth watching for investors. While it could certainly experience more sustainable growth in the future, the type that we’re seeing now shouldn’t serve as an indicator that the volatility is over for ATER stock.
If the company were to expand or produce something to send prices up, the type of attention it could garner from internet forums could certainly help send it up even further. While it has the potential for growth, any long-term progress will only be sustainable if it is for a better reason than digital contrarians wanting to employ an anti-Wall Street play.
On the date of publication, Samuel O’Brient 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 InvestorPlace.com Publishing Guidelines.
