Search queries focusing on stocks with the highest short interest this week are generating tremendous buzz. Few other subsegments within the capital market enable regular retail investors to enjoy enormous upside within a condensed period. Yet prospective participants must realize the dangers involved.
At its core, betting on the stocks with the highest short interest this week symbolizes contrarianism to the extreme. Essentially, the goal is to stare down the bears and (hopefully) force them to blink first. In doing so, the pessimists must first buy back their targeted stocks in order to exit their short positions. During a panicked exit, the subsequent trading can yield tremendous gains for the contrarian bulls.
However, sometimes – perhaps most times – securities that attract the bears represent catastrophically flawed enterprises. Therefore, you want to be careful before wagering in this ecosystem. Nevertheless, if you want to speculate, these are the stocks with the highest short interest this week.
Silvergate Capital (SI)
Based in La Jolla, California, Silvergate Capital (NYSE:SI) bills itself as an industry-leading banking and payments solutions provider for innovative digital currency and financial technology (fintech) companies. Unfortunately, the problem centers on a lack of belief in Silvergate’s business. In the trailing year, SI gave up a staggering 88% of equity value. It’s not doing so hot this year as well, with shares down 17%.
Naturally, Silvergate ranks among the stocks with the highest short interest this week. Per data from Fintel’s Short Squeeze Leaderboard, SI features a short float of 72.8%. As well, its short-interest ratio pings at 2.47 days to cover. Currently, SI ranks number 24 in Fintel’s list of the top 250 most-shorted securities. It slipped 15 ranks over the past week.
Still, for those seeking to blow up the bears’ portfolios, SI might be an intriguing idea. That’s because a declining pace of shorting action might suggest bullish momentum building. Adding to that theme, Silvergate features an undervalued profile. For instance, the market prices SI at 0.75 times the book value. As a discount to the underlying metric, Silvergate ranks better than 63.71% of the industry.
Notably, Wall Street analysts peg SI as a consensus hold. Still, their price target of $17.56 implies 22.5% upside potential.
An online used-car retailer, Carvana (NYSE:CVNA) garnered plenty of relevance during the worst of the coronavirus pandemic. With few people wanting to take public transportation, people bought personal rides at a blistering pace. However, with Covid-19 fears fading, this narrative crumbled. Despite gaining 73% since the Jan. opener, CVNA fell nearly 95% in the trailing year.
According to MarketWatch, Carvana ranks number two in terms of most shorted security at the time of writing. On Fintel’s Short Squeeze Leaderboard, CVNA ranks number 39, moving up 12 places. Currently, CVNA features a short interest of 71.37%. Also, its short-interest ratio pings at 2.99 days to cover.
Fundamentally, contrarian investors may want to avoid this example of stocks with the highest short interest this week. According to Gurufocus.com, Carvana rates as a possible value trap. Should the consumer economy weaken, people will see the lowest price possible for high-ticket items. Carvana simply imposes too much of a premium for its convenient car-delivery service.
Still, if you want to take a contrarian bet, covering analysts believe CVNA will hit $9.58 a share. This translates to 20% upside potential.
Based in Columbus, Ohio, Root (NASDAQ:ROOT) plies its trade in the insurance industry. Per its public profile, Root is the nation’s first licensed insurance carrier powered entirely by mobile. The problem? Unfortunately, the market doesn’t give a hoot. Sure, ROOT gained 24% of equity value since the Jan. opener. That hardly dents the trailing-year loss of 84%.
Unsurprisingly, MarketWatch identified ROOT as one of the stocks with the highest short interest this week. Per Fintel, ROOT features a short interest ratio of 17.56%. Further, its short-interest ratio stands at 10.96 days to cover. Presently, it ranks number 82 on the investment resource’s Short Squeeze Leaderboard. It fell 34 places over the past week.
Fundamentally, speculators may want to steer clear of the “opportunity.” Essentially, insurance providers need robust financials to do what they do. This hardly describes Root, which suffers from a deeply negative net margin. In addition, the company’s three-year revenue growth rate sits at 4.8% below parity.
However, covering analysts believe that ROOT can reach a price target of $7.68. If so, shares might jump almost 44% from here.
Another “top” name among stocks with the highest short interest this week, PaxMedica (NASDAQ:PXMD) is a biopharmaceutical company focused on developing innovative treatments for unmet needs in neurodevelopmental disorders. As with other healthcare-related enterprises, people inherently root for medical innovators. Unfortunately, PXMD failed to capture the positive sentiment. In the trailing year, shares slipped nearly 61%.
Presently, PaxMedica prints a short interest of 16.05% with a short interest ratio of 2.97 days to cover. On Fintel’s Short Squeeze Leaderboard, PXMD ranks as number 17. It moved up three spots over the past week. Notably, its year-to-date performance is weak, gaining only half a percent.
For speculators of stocks with the highest short interest this week, PXMD could be intriguing. To be sure, PaxMedica doesn’t own robust financials. As a pre-revenue enterprise, it depends on strong clinical results for its drug pipeline. However, it does feature a cash-rich balance sheet relative to the debt held. Currently, no Wall Street analyst covers PXMD. Therefore, it’s a reference less speculative trade no matter which direction you choose.
Leveraging artificial intelligence to undergird a lending platform that partners with banks and credit unions to provide consumer loans using non-traditional variables, Upstart (NASDAQ:UPST) sounds like a groundbreaking innovation. Unfortunately, it ranks among the stocks with the highest short interest this week. True, UPST soared 40% in the year so far. However, investors mostly remain unimpressed, as evidenced by its near-87% loss in the trailing year.
Right now, UPST ranks number 144 on Fintel’s Short Squeeze Leaderboard. It fell seven places over the past week. Nevertheless, UPST’s short interest stands at a lofty 40.3%. As well, its short-interest ratio pings at 5.02 days to cover.
Fundamentally, UPST represents one of the stocks with the highest short interest this week to avoid. For one thing, its three-year revenue growth rate sits in negative territory. As well, its net margin swims in red ink. Plus, its balance sheet features many weaknesses. Moreover, Wall Street analysts peg UPST as a consensus moderate sell. Their average price target sits at $14.88, implying over 17% downside potential. Let the bears have this one.
Although electric vehicles may be the future, you wouldn’t guess that by looking at EVgo (NASDAQ:EVGO). On paper, EVgo is a compelling example of the EV revolution, specifically targeting charging infrastructures. However, at the moment, it ranks among the stocks with the highest short interest this week. That’s not a shocker given its market performance. In the trailing year, shares tumbled by more than 39%.
According to Fintel’s Short Squeeze Leaderboard, EVGO ranks number 134. It fell 19 places over the past week. However, its short interest pings at slightly over 37%, which is rather elevated. Also, its short-interest ratio stands at 20.62 days to cover, also a high figure.
Fundamentally, EVGO presents a tricky case for stocks with the highest short interest this week. For instance, in its latest quarter, the company posted revenue of $10.51 million, up 70% year-over-year. However, the net loss came in at $13.22 million, a far cry from the net income of $6.13 million in the year-ago quarter.
Finally, covering analysts’ peg EVGO as a consensus hold. Their average price target implies upside of less than 5%. Because of that, it seems risky to go contrarian.
Beyond Meat (BYND)
Although meatless alternatives have long existed in the food industry, Beyond Meat (NASDAQ:BYND) arguably made fake animal protein cool again. To be sure, BYND represents a strong performer recently. Since the January opener, it gained over 52% of its equity value. However, in the past 365 days, it fell almost 58%. Subsequently, it’s one of the stocks with the highest short interest this week.
On Fintel’s Short Squeeze Leaderboard, Beyond Meat ranks number 92. It fell seven spots in the past week. Still, BYND features a short interest of 36.88%. As well, its short-interest ratio is fairly elevated at 10.26 days to cover.
Financially, contrarian traders face a tough situation. According to Gurufocus.com, BYND rates as a possible value trap. However, millennials have gravitated toward plant-based food in recent years. Therefore, Beyond Meat could jump higher. Nevertheless, read what the analysts have to say, which peg BYND as a consensus moderate sell. Additionally, their average price target sits at $11.80, implying 37.5% downside risk.
On the date of publication, Josh Enomoto 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.