Summer is winding down, but things are heating up for Party City (NYSE:PRTY). The party-supply retailer fell off the radar for many investors when it plunged more than 60% in early May 2022. While it remained stagnant for most of the summer, PRTY stock has recently started moving again. Despite losing momentum from its early morning rally, PRTY is still up more than 8% for the day. It has spiked by more than 37% over the past five days and almost 75% for the month. Since the company has not reported any positive growth catalysts, this impressive surge has the markings of a short squeeze.
Let’s take a closer look at what’s been happening with PRTY stock and what investors can expect.
PRTY Stock: A Surge Worth Watching
For investors looking for the next meme stock, Party City checks all the important boxes. It’s a company that has been snubbed by Wall Street. This is due to both its status as a microcap penny stock and its failure to demonstrate any real growth. But it’s also a retail company that everyday Americans know.
Earlier this month, we saw the r/WallStreetBets crowd pile into Bed Bath & Beyond (NASDAQ:BBBY) amid a new meme-stock frenzy. After an impressive surge, the retail meme stock started tanking hard last week, taking many of its peers with it, including GameStop (NYSE:GME). Investors need a new short squeeze, and PRTY fits the mold.
It’s worth noting, though, that short interest in PRTY stock has been rising since before BBBY started falling. As The Motley Fool reports, “As of July 29, 18% of the stock was sold short, which seemed to be enough to set it up for a short squeeze.” Almost one month later, the stock’s performance indicates that it has definitely been marked as a short favorite.
As of this writing, PRTY is among the top trending tickers on Memeberg Terminal among stocks generating buzz on Reddit. While it still ranks behind Bed Bath and Beyond, GameStop and AMC Entertainment (NYSE:AMC), Party City’s mentions on the platform have risen more than 77% over the past 24 hours. Meanwhile, elsewhere on social media, retail traders have been hyping PRTY stock up considerably, touting mentions on r/WallStreetBets and calling for bullish plays.
What Comes Next
Everything we’ve seen so far calls to mind a meme-stock short squeeze. Additionally, data from experts supports the Party City short thesis. Short-squeeze analytics platform Fintel reveals that PRTY stock has a fairly high short interest at 12%. With 0.56 days to cover and 12.3% of the float being sold short, there is definitely intrigue here. While Party City doesn’t rank among the top short candidates on Fintel’s U.S. leadership board, none of the top ranked short favorites are trending on Reddit.
The question remains: Just how high can PRTY stock go? But investors should also be asking how long it can keep rising for. Short squeezes tend to leave stocks deflated after shares inevitably come crashing down. However, some meme stocks are better off after being squeezed hard. Short squeezes helped signal turnarounds for stocks like GME and AMC. While it’s temping to assume that Party City will follow the same path as Bed Bath and Beyond, the former still trades at lower levels. This may make it a temping play for contrarian investors looking to cash in on the new meme-stock boom.
While the immediate future remains uncertain, investors should be keeping a close eye on this stock. PRTY doesn’t just check all the boxes for a meme stock, it checks all the important ones for a short squeeze favorite.
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.