Speculators looking for shorts to squeeze have found a new target in Blue Apron (NASDAQ:APRN). The failing meal kit company was up 12% on Jan. 12, then gained another 30% overnight. APRN stock has nearly doubled in price since Jan. 9.
However, the gains still leave the price of APRN stock at less than $1.20 per share and the market capitalization below $50 million.
The Short Game
Fundamentally, Blue Apron is a dead company walking. It has never made money, usually performing a lot worse than analysts’ estimates. It lost $25.7 million, or 74 cents per share in its third quarter, while analysts expected a loss of 50 cents. Revenue for the first three quarters was $12 million below that of 2021, while losses were $25 million higher.
Small wonder APRN stock lost 90% of its value before the latest rebound. Shares were trading at more than $11 in late 2021. Before the latest gains, Blue Apron was a candidate for delisting, absent a reverse split.
The losses, however, attracted a lot of short sellers. Fintel recently estimated 45% of Blue Apron shares were being held short. Investorplace pointed out the stock’s potential as a short squeeze candidate back in October.
A small market cap also makes Blue Apron attractive for short squeezers. A small crew of investors can keep the shorts from closing out positions, raising the price of the stock until the shorts take their losses.
That’s just what observers are seeing at Stocktwits. One user noted 7 million shares traded premarket Jan. 13, capturing half the company’s float. “Time to kill shorts today,” the user concluded.
Using data from Stocktwits, WallStreetOdds has estimated about 25,000 people are now following Blue Apron online, with almost 800 new followers observed in just two days.
What Happens Next for APRN Stock?
Short squeezes end. Buying a stock to “squeeze the shorts” can be profitable. But if you are going to play, know when to sell. Don’t be greedy. Limit your losses by closing winning positions and get out at the first sign of a reversal.
When the music stops, you don’t want to be left holding APRN stock.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Dana Blankenhorn 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.