Short-squeeze stocks will remain popular as long as turmoil continues. Since 2021 looks to continue its tumultuous streak, we can assume trends will continue.
We know that there has been something of a renaissance in investing this year. Retail investors have banded together to affect the stock market to an unprecedented degree. They have relied on social media platforms including Twitter (NYSE:TWTR) and Reddit, namely Wall Street Bets, to coordinate their actions.
They often bounce ideas off one another in search of the next GameStop (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC). But make no mistake about it, they have had success. They’ve caused significant losses, in the billions, to hedge funds like Melvin Capital and Light Street Capital.
The favored metric of this crowd is short interest — the percentage of float sold short, but not yet covered or closed out. Retail investors can combine that number with other metrics including days to cover. But ultimately, identifying the next short squeeze candidate is part art, part science.
We are looking for short-squeeze stocks that could soar in October. So we likely need another catalyst in addition to short interest. In my mind, that catalyst exists in Ford’s (NYSE:F) huge announcement to build three battery plants and an electric vehicle (EV) assembly plant.
My thesis is this: The EV stock sector is ready to receive a bump. So the EV industry and short-squeeze stocks now have two catalysts to propel them upward in October. They could get squeezed and shoot upward. Or they could simply get pulled upward on broad EV tailwinds.
- Fisker (NYSE:FSR)
- Blink Charging (NASDAQ:BLNK)
- Arcimoto (NASDAQ:FUV)
- Workhorse (NASDAQ:WKHS)
- Romeo Power (NYSE:RMO)
- Lordstown Motors (NASDAQ:RIDE)
- Nikola Corp. (NASDAQ:NKLA)
Short-Squeeze Stocks That Could Soar: Fisker (FSR)
If Fisker indeed rises in October it could certainly be because of a short squeeze. After all, FSR stock currently has short interest around 30%. There’s little predicting if or when a short squeeze can be affected, but 30% short interest is exceptionally high.
However, let’s take a look at why Fisker could rise more organically. Again, my premise here is that there could be a resurgence in demand for EV stocks as both Ford and General Motors (NYSE:GM) have recently upped their EV investments. If that materializes, Fisker would clearly benefit on the tailwinds of industry shifts.
Fisker is also an EV manufacturer deserving of attention on its own merits. Those merits are based on its asset light model, Fisker’s first vehicle, the Ocean SUV, produced by Magna International (NYSE:MGA). Magna International has a track record of success as an original equipment manufacturer (OEM) for the automotive industry. With Magna as a partner, any pundits favor Fisker’s chances when it releases the Ocean.
Analysts at Tudor Pickering Holt recently initiated coverage of Fisker, giving it a buy rating and a $19 target. That news alone could reverberate through the markets and spike prices.
Blink Charging (BLNK)
Blink Charging has had an interesting year to say the least. Reaching upwards of $60 in late January, the price has cooled and stabilized in recent months. When the company released earnings on Aug. 11 there was an arguable case for optimism.
The company’s revenues increased 177% from $1.6 million in Q2 FY20, to $4.4 million this year in Q2.
Further, the company’s commercial strategy of contracting owner/operators showed progress as well. The company grew the number of owner/operators by 46% in Q2 on a year-over-year basis.
And so on and so forth. There were a number of other metrics that showed growth for the EV charging network company.
But a few arguably larger issues are serving to weigh BLNK stock down. The company recorded a net loss of $13.5 million in the quarter, much higher than the $3 million loss in Q2 FY20. And EV valuations remain stretched.
If the EV sector gets traction from Ford’s and GM’s announcements, BLNK shares could rise anyway.
The other potential catalyst here is the sky-high 35.38% short interest underpinning its stock.
That could trigger a squeeze of course. But the short float could also simply decline, which would serve to increase share prices and reduce the likelihood of a short squeeze happening in the first place.
Short-Squeeze Stocks That Could Soar: Arcimoto (FUV)
Arcimoto may not be among the most likely EV manufacturers to benefit from recent investments by legacy automakers. After all, the company produces what it terms calls FUVs, Fun Utility Vehicles. There’s a chance the market could simply dismiss them by viewing them as different from larger, traditional EVs. So perhaps it won’t rise even if Ford’s moves catalyze the sector upward.
But Arcimoto does fit the bill based on the criteria I set for having the potential to soar in October. It is still part of the EV sector, and it does have high short-squeeze potential with over 37% short interest. It certainly has the potential to rocket upward based on that.
It would seem unlikely that Arcimoto should soar otherwise. It manufactured 85 vehicles and sold 30 in Q2. Its market is fairly limited given that the two seater urban vehicles it makes haven’t carved out a significant market presence yet.
However, Q2 was the company’s best to date and it is on track to build 425 vehicles this year.
It could certainly be argued that Workhorse deserves the near 39% short interest it currently carries. The company has faced a series of recent setbacks. Those setbacks suggest that its price may head southward even further than it already has.
Of course, that same series of setbacks could trigger a short squeeze sending it soaring this month.
Among the latest bad news for the company was a suspension of production of its C-1000 vans and a recall for those in service. The company didn’t give concrete reasoning behind the move, stating instead: “We have identified a number of opportunities to improve our C-1000 series vehicles and are committed to getting these previously delivered vehicles back on the road.”
It didn’t matter as prices dropped nearly 10% in the immediate aftermath of the announcement as 41 vehicles were recalled.
Then a week later two top executives announced they were leaving the company. CFO Steve Schrader and Chief Operating Officer Rob Willison stepped down with little warning.
The silver lining in all of this is that the company still has Richard Dauch at the helm. The well regarded former CEO of Delphi Technologies has been tasked with a turnaround of the Ohio company.
WKHS stock has shown resilience. It popped upward in the days following the recall and production halt. Perhaps that will happen again.
Short-Squeeze Stocks That Could Soar: Romeo Power (RMO)
If an EV rebound occurs this month, there’s a case to be made that Romeo Power could rise quicker than most. It is technically in penny stock territory after dipping below $5 when it disappointed with its Aug. 17 earnings.
Basically the company fell well short of expectations. The $926,000 of revenues it posted were well short of $2.37 million analysts sought. That led to -22 cent earnings per share, where -16 cents were expected.
Further, the $926,000 of revenues was less than the $1.13 million it posted a year prior. Yet, Wall Street still has positive expectations for the firm and its shares. In fact, the four analysts with coverage have given RMO stock a target price of $7.43. That’s more than 50% return based on current prices below $5.
The truth is that it remains early in the evolution of the EV sector. And Romeo Power’s battery packs only recently surpassed 750,000 miles of road testing.
The other truth is that short interest sits at 25%. Although not extremely high, that figure puts the company in short squeeze territory for the month of October.
Lordstown Motors (RIDE)
Lordstown Motors remains a short squeeze target with its 17% short interest. While that may send it soaring in October, there’s a more likely candidate.
That catalyst is that Lordstown struck a deal with Foxconn, which should more than double Lordstown’s cash balance.
Lordstown is selling its plant to Foxconn in order to pay to for its vehicle assembly. Lordstown will sell the plant to Foxconn for $280 million and purchase $50 million of RIDE stock. Foxconn will also receive the warrant rights to purchase 1.7 million shares of RIDE at $10.50.
So Lordstown has more than doubled its cash balance. That should ease investor concerns to a degree, which could send prices upward. And Foxconn has added incentive to make Lordstown operate more effectively. It could profit several million dollars from the exercise of those warrants.
Early investors in Lordstown would certainly welcome such a turnaround. RIDE shares have lost approximately 80% of their value since peaking in early February.
Short-Squeeze Stocks That Could Soar: Nikola Corp. (NKLA)
Analyst predictions regarding Nikola are all over the board. They range from $9 to $24 and average out to $13.75. If Ford pulls the broader sector upward then NKLA stock should rise toward that average of $13.75 from its current $11.13 price.
At the same time, the markets don’t particularly favor Nikola right now. That’s evident in its nearly 20% short interest. And it’s also evident in the fact that 7 out 10 analysts covering Nikola rate it a hold.
The other truth is this: Hold ratings indicate indecisiveness. In other words, Nikola could go up or it could go down. The good news is that at $10.68, it isn’t far from the low analyst target price of $9. Remember, the high target stock price is $24.
But that’s mostly wishy-washy guestimation. Investors need real news. Fortunately there is some reason for optimism there according to a recent announcement saying Nikola entered an agreement to construct a number of hydrogen fueling stations across North America. This could act as an individual catalyst for Nikola.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.