Upstart (NASDAQ:UPST) stock may be the new major short squeeze candidate on Wall Street lately, at least according to S3 Partners. Specifically, S3 pegged the currently rallying artificial intelligence (AI) lending platform as one of the “squeeziest” stocks around.
Is Upstart in the middle of a short squeeze?
Well, maybe. The California-based company is in the middle of a major rally that has lasted the better part of the last month. Upstart also has a short interest of more than $450 million according to S3, representing 32% of float.
The lending company has been extremely vulnerable to microeconomic changes. Indeed, should interest rates go up, (which seems increasingly likely given the current state of the debt ceiling crisis) Upstart’s total loan volume will likely experience a notable drop. This is similar to what happened to the company in 2022 in the face of Federal Reserve rate hikes.
Last year, Upstart announced an annual loss of $109 million, which only increased in the first quarter of 2023 to $129 million. For a company with close to $1 billion in loans on its balance sheet, it’s not exactly a promising sign that its net losses only continue to rise as lending markets face a dry spell.
UPST Stock Rally May Be a Short Squeeze in Disguise
UPST stock seemingly can’t stop climbing. Currently, shares are up more than 85% over the past month. Of course, this isn’t entirely without merit. Upstart announced relatively strong earnings earlier this month. The company also recently closed a deal to sell up to $4 billion worth of consumer loans to Castlelake. Still, many investors believe Upstart could be in the midst of a short squeeze.
A short squeeze is essentially a targeted effort to inflate a stock with a high short interest in order to force owners of short shares to sell off their position, which pushes the stock price even higher.
It’s unclear exactly what’s happening with Upstart’s share price currently, but the stock closed today up nearly 20%. Whether this trend continues going forward remains to be seen.
On the date of publication, Shrey Dua 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.
