Today’s price action in Fisker (NYSE:FSR) stock has been relatively solid. Yes, the market is up overall and investors appear to be taking a risk-on approach to equities. But the current 4% bump in FSR stock may be indicative of something else — specifically, a short squeeze.
Recently, S3 Partners and other prominent analysts indicated that a number of unprofitable electric vehicle (EV) stocks may be due for a short squeeze. Fisker, Lordstown Motors (NASDAQ:RIDE), Faraday Future (NASDAQ:FFIE), Canoo (NASDAQ:GOEV) and Lucid (NASDAQ:LCID) all made the cut.
No doubt, this market has made short selling highly valued (and unprofitable) companies a rewarding exercise. Each of these early-stage electric vehicle makers are trading well off their highs.
However, it’s not necessarily that easy to be a short seller. On any sort of catalyst, these EV stocks can shoot up in incredible fashion via various near-term spikes.
With that said, let’s dive into what experts will happen with FSR stock and its peers.
Is a Short Squeeze in Store for FSR Stock?
Analysts have cited the recent, incredible price action in Canoo a number of times as an example of the short squeeze potential in the EV sector. GOEV stock is up 70% for the past one month. Last year, most notable short squeezes took the form of unprofitable retailers. But EV stocks have also pumped to incredible heights since early 2021 and its meme stock mania.
At the time, short interest levels on various unprofitable-but-popular stocks were high. Given how far these stocks had already fallen, options prices also became cheaper. Thus, with coordinated buying pressure, retail investors won some high-profile short squeeze battles against large hedge funds. GameStop (NYSE:GME) and AMC (NYSE:AMC) are the two most notable examples.
Following these squeezes, though, short sellers became more cautious. Some closed up shop and moved on. However, short interest has still lingered, picking up in certain parts of the market. With Fisker and its EV peers seeing significant increases in short interest right now, there appears to be something to the S3’s squeeze thesis.
That said, as with any potential speculative catalyst, the trade can work in both directions. These EV companies are heavily shorted for a reason. So, stepping in front of this trade in either direction could result in significant losses. It’s investor beware out there — and it may stay that way for some time.
On the date of publication, Chris MacDonald did not hold (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.
