Secured logistics provider Guardforce AI (NASDAQ:GFAI) once again shocked the market with a dramatic swing higher. Lacking catalysts from the news cycle, GFAI stock likely jumped on speculative fervor regarding a possible short-squeeze opportunity. Nevertheless, interested traders should understand that against a longer-term framework, Guardforce presents an extremely risky proposition.
Perhaps most prominently, data from Fintel indicates that the short borrow fee for GFAI stock reached 198.64%. This figure represents a 146% increase in the metric from this week’s Monday session. Per Fintel, the short borrow fee is the interest rate that a short seller must pay to the lender of the underlying security.
Adding to contrarian intrigue for GFAI stock is the number of shares available to be shorted at a leading prime brokerage. Currently, Fintel notes that this stat sits at zero. Yesterday morning, the figure reached only 4,000 shares. To clarify, this figure does not include data from other brokers or dark pools. However, it does lend some credence to the short-squeeze argument.
Also, GFAI stock printed 89.80 out of 100 for Fintel’s Short Squeeze Score. Per the investment resource, higher numbers equate to a higher risk of a short squeeze materializing relative to its peers. Indeed, GFAI became a recent entry into Fintel’s Short Squeeze Leaderboard, coming in at 29 out of 250 most heavily shorted stocks.
GFAI Stock Still Presents High Risks
While GFAI stock might appeal to those seeking quick profits, significant dangers exist in participating in this trade. For one thing, the longer-term performance framework discourages investors intolerant of volatility. In the trailing year, shares fell 68%. Since GFAI’s first public trading session, it dropped nearly 91%.
If that wasn’t enough, the 60-month beta for GFAI stock stands at a staggering 2.72. Beta refers to a measure of a security’s historical volatility compared to a benchmark index like the S&P 500. A beta of 1 matches the ebb and flow of the S&P 500. Figures greater than 1 indicate above-average volatility.
Also, InvestorsObserver points out that GFAI stock incurs a bearish sentiment reading. That’s hardly surprising, given the red ink printed and the extremely lofty beta.
Nevertheless, chasing GFAI stock to spark a short squeeze might be imprudent. Conspicuously, the latest data from Fintel indicates that GFAI’s short interest sits at 4.74% of its float. That’s hardly an impressive figure compared to other popular short squeezes investors witnessed. The short-interest ratio is also only 0.01 days to cover – a minuscule reading.
Why It Matters
In fairness, TipRanks notes that among all investors it surveyed, those who hold GFAI stock have a very positive sentiment toward it. Specifically, GFAI stakeholders are up 3.9% on their investment within the last seven days. For the previous 30 days, they’re up 4.6%. Still, anything can happen with a volatile security, so caution remains key.
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.
