In an equities sector where bad news can suddenly represent good news, home décor retailer Kirkland’s (NASDAQ:KIRK) offers the latest example of counterintuitive trading dynamics. On paper, the company doesn’t appear to have a competitive moat in an inflationary cycle. Nevertheless, the understandable pessimism in KIRK stock seems to have attracted contrarian meme stock traders. Today, shares are up by double digits.
Two factors affirm suspicions about a potential short-squeeze attempt with KIRK stock. First, social media has been abuzz about Kirkland’s and its stock. And second, the company has offered no real news items for investors to chew on. Kirkland’s recently set a date for its second-quarter earnings conference call, but that’s about it. More tellingly, trading data indicates a significant increase in short interest in July for KIRK stock.
Let’s dive into what’s going on with Kirkland’s and its shares today.
KIRK Stock Plays Into a Sudden Pivot
Fintel, a popular resource for investors monitoring bearish activity, provides further insights about KIRK stock and this possible short-squeeze attempt. Fintel shows short interest for Kirkland’s at 29%, although days to cover has dipped to 0.45. Nevertheless, the site currently ranks KIRK stock 19th on its Short Squeeze Leaderboard. That marks a significant 59 place jump in Fintel’s index from one week ago.
Just as importantly, Kirkland’s represents one of a growing number of examples of the meme stock phenomenon’s resurgence. Retail investors have recently swarmed popular equities and their underlying bullish call options, encouraging others to bid up the inferno. Last week, The Wall Street Journal cautioned against overexuberance in August compared to the wild ride of 2021.
“This month is different. For one thing, individual investors’ activity is still well off the record highs notched last year. Fears about decades-high inflation and a possible future recession continue to loom, confounding professionals and rookies alike on where the stock market might go from here.”
That said, in some ways, KIRK stock does represent the classic meme trade. Back at end of May, the company reported disappointing Q1 results. Kirkland’s badly missed the consensus target for earnings per share (EPS). Q1 revenue also slipped $20.3 million against the year-ago quarter. Now, this red ink appears to be helping encourage retail traders to consider KIRK as a contrarian — albeit extremely risky — opportunity.
Why It Matters
Kirkland’s isn’t the only home décor specialist to enjoy the recent resurgence in meme stocks. Yesterday, shares of Bed Bath & Beyond (NASDAQ:BBBY) stock skyrocketed higher. They continue to do so today. Per Reuters, activist investor Ryan Cohen just doubled down on his bullishness on BBBY stock via call options.
As of this writing, shares of KIRK stock are up more than 25%.
On the date of publication, Josh Enomoto 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.