While an extremely risky proposition, short-squeeze stocks – as meme traders demonstrated – can occasionally yield radical profitability. However, you don’t want to just pick any beaten-down security as a possible comeback candidate. At the heart of the matter, a high magnitude of short interest translates to bearish sentiment, not bullish.
Instead, prospective speculators may want to consider short-squeeze stocks that may appear to be bleeding out but also command positive fundamentals. Whether we’re talking about overlooked financial resilience, a compelling upside narrative, or in this case, strong analyst support, some bearishly targeted enterprises provide superior opportunities for the boomerang effect.
Indeed, the below enterprises all feature analyst consensus ratings of at least moderate buy. As well, their expert price targets average a stunning 175.72%. If you’re ready to teach the bears a lesson, these are the short-squeeze stocks to consider.
Clear Secure (YOU)
At first glance, technology firm Clear Secure (NYSE:YOU) might seem a reasonable enterprise to short. Specializing in biometric travel document verification services, Clear Secure appears incredibly relevant. However, since the Jan. opener, YOU stock dipped 8%. Since its first public trading session in 2021, shares tumbled nearly 47%. Nevertheless, YOU could be one of the short-squeeze stocks to explode in April.
Financially, Clear Secure may have attracted bears because of two important factors: middling stability in the balance sheet and profitability margins below breakeven. While concerning from a fiscal perspective, fundamentally, the rise in travel demand (associated with post-pandemic dynamics) may bolster YOU’s valuation. Also, the company features a three-year revenue growth rate of 17.2%, above 71.07% of sector peers.
Finally, Wall Street analysts overall appreciate the upside opportunity in YOU, pegging it a consensus moderate buy. As well, their average price target comes out to $37, implying over 44% upside potential.
Warby Parker (WRBY)
On paper, eyecare retailer Warby Parker (NYSE:WRBY) seems a no-brainer as a bearish target. Since the beginning of the new year, WRBY fell nearly 29%, a staggering magnitude of underperformance. Also, in the past 365 days, it lost almost 72% of its equity value. While seemingly hopeless, speculators could bid shares up, making it one of the short-squeeze stocks to watch.
At the time of writing, WRBY features a short interest of 41.12% along with a short interest ratio of nine days to cover. Such intense bearishness makes it a contrarian target for the opposing side. To be fair, Warby’s financials don’t look enticing in the least. Glaringly, its three-year revenue growth rate sits at 46.1% below breakeven. Its profitability margins also rank in the negative territory.
If that wasn’t bad enough, its Altman Z-Score is 1.74, indicating a distressed fiscal profile. Nevertheless, Wall Street analysts continue to support WRBY, pegging it a consensus moderate buy. Their average price target hits $15.88, implying over 55% upside potential.
Based in California, Cutera (NASDAQ:CUTR) seems destined for the trash bin. Per its website, Cutera specializes in medical aesthetics, which range from body sculpting to skin revitalization. Unfortunately, as of the moment, CUTR simply stinks up the place. Since the Jan. opener, CUTR dropped nearly 45% in equity value. In the past 365 days, the security hemorrhaged 64%.
Still, we could be talking about another example of short-squeeze stocks that might explode higher. Presently, CUTR features a short interest of 34.15% and a short interest ratio of nine days to cover. The wild thing here is that bearish traders had every right to be pessimistic. Notably, Cutera’s profit margins slipped into negative territory. As well, its Altman Z-Score of 0.98 indicates fiscal distress.
As well, the company only features a three-year revenue growth rate of 1.5%. This ranks worse than 65.8% of the medical devices and instruments industry. However, covering analysts still like CUTR, pegging it a consensus moderate buy. Moreover, their average price target stands at $42.67, implying nearly 81% upside potential.
Offerpad Solutions (OPAD)
Just from a cursory perspective, Offerpad Solutions (NYSE:OPAD) seems wildly risky. Glancing at its website, the company focuses on providing quick cash offers to home sellers. Of course, the problem centers on a few people wanting to sell their homes during a deflationary cycle for the housing sector. Despite a strong 14% performance since the start of the year, in the trailing year, OPAD plunged 90%.
Normally, risk-averse investors should avoid OPAD. However, it’s quite possible that it could feature as one of the short-squeeze stocks to watch. Right now, OPAD features a short interest of 40% and a short interest ratio of 16 days to cover. To be fair, bearish traders were right to be pessimistic. Again, we’re talking about an enterprise with negative profit margins.
On the flip side, contrarians may note that Offerpad posts an Altman Z-Score of 4.18, indicating low bankruptcy risk. Remarkably, analysts still believe in OPAD, rating it a consensus moderate buy. Their average price target stands at $1, implying upside potential of 95%.
A provider of coworking spaces, WeWork (NYSE:WE) attracted less-than-ideal attention for its failed initial public offering (IPO) attempt in 2019. Eventually, the enterprise rectified the situation through a reverse merger with a special purpose acquisition company (SPAC). Unfortunately, SPAC-based IPOs turned out to be less than ideal. Indeed, for WE stock specifically, it gave up more than 46% of its equity value since the start of the year.
Despite the obvious pressure, WE may be one of the candidates for short-squeeze stocks. Presently, WeWork shares feature a short interest of 37.69% and a short interest ratio of 7.8 days to cover. To be 100% clear to prospective traders, WeWork’s financials present a hideous profile. Along with deeply negative profit margins, the company’s three-year revenue growth rate also sits below breakeven.
Also, it’s noting the Altman Z-Score of 1.54 points below parity. Naturally, this rating indicates distress and higher-than-normal bankruptcy risk. Nevertheless, analysts want to give WE a chance, pegging it a consensus strong buy. Additionally, their average price target stands at $2.25, implying 200% upside potential.
Allogene Therapeutics (ALLO)
Headquartered in San Francisco, California, Allogene Therapeutics (NASDAQ:ALLO) is an advanced biotechnology firm. Specifically, it focuses on developing specialized antigen receptor T-cells to foster the next immunologic breakthrough in cancer. While scientifically relevant, ALLO gave up more than 11% of equity value since the Jan. opener. In the past 365 days, it’s down more than 45%.
Although the red ink surely distracted traders, ALLO could rank among the short-squeeze stocks. Currently, ALLO features a short interest of 43.98% and a short interest ratio of 21.2 days to cover. With little room to hide if the bulls coordinate their bidding for ALLO, the bears must tread carefully. To be sure, Allogene’s financials present a rough picture. Mainly, its profit margins fell deeply into the abyss. As well, its Altman Z-Score mustered only 0.06 points, indicating distress.
Astonishingly, covering analysts peg ALLO as a consensus moderate buy (with only one individual sell rating). Further, their average price target comes out to $17.87, implying nearly 250% upside potential.
Based in Houston, Texas, Aravive (NASDAQ:ARAV) is an oncology firm. Specifically, the company specializes in transformative targeted cancer therapeutics with multiple indications. On paper, ARAV appears very encouraging. Since the Jan. opener, shares gained over 65% of equity value. Overall, in the past 365 days, they’re up 6%.
So, what’s the problem? Financially, Aravive is an utter mess. As with other short-squeeze stocks, profit margins fell deeply into negative territory. Just as worryingly, its three-year revenue growth rate sits at 15.1% below zero. On the balance sheet, the company’s Altman Z-Score slipped to 15.52 points below breakeven.
Not surprisingly, ARAV features a short interest of 41.73% and a short interest ratio of eight days to cover. Despite the obvious concerns here, Wall Street analysts peg ARAV as a – get this – unanimous strong buy. Their average price target stands at $13, implying over 510% upside potential.
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.