Shares in grill maker Weber (NASDAQ:WEBR) surged 27% Aug. 18. WEBR stock rose further overnight on speculation it could be the next Bed, Bath & Beyond (NASDAQ:BBBY). BBBY stock recently rose from below $10 to over $25 on a short squeeze.
Stock market influencer Will Meade offered several comparisons between the two on Twitter. The most important is that WEBR has very high short interest, as much as 67% of the outstanding shares.
WEBR is due to open Aug. 19 at $10.14 a share, a market capitalization of $2.8 billion on 2021 sales of $1.98 billion. The company is based in Palatine, Illinois, a suburb of Chicago.
What’s Going on With WEBR Stock?
Weber reported a disastrous third quarter on Aug. 15. The company lost $52 million, 14 cents per share, on sales of $528 million. Sales were down 21% from a year earlier.
Managers blamed margin pressures and global headwinds. While insisting Weber had “an immense opportunity” to increase its relationship with 50 million customers, they also said they will cut the workforce and suspend the dividend.
Shares bottomed two weeks earlier, trading as low as $6.11 on Aug. 1. They were already rising when the results came out. So was short interest.
Traders at subreddit r/WallStreetBets quickly pounced, asking where the short sellers will get the shares to unwind their trades. They noted that the largest investor in Weber is Byron David Trott, a former Goldman Sachs (NYSE:GS) banker trusted by Warren Buffett of Berkshire Hathaway (NYSE:BRK-A). They also noted 13F filings showing buying interest and rising costs for borrowing stock to short.
What Happens Next?
Shares in BBBY collapsed overnight after investor Ryan Cohen said he sold his stake, dropping by half to a little over $10. This offers a lesson to anyone interested in Weber.
Professionals don’t fall in love with their stocks. They watch every trade and get out when they have a profit. The most essential thing for a trader to know in a short squeeze is when to sell. By the time trading opens Aug. 19, the squeeze in Weber may already be over.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
