Back in early 2021, investors were on the hunt for potential short squeeze stocks. Traders across various mediums (like Reddit) were sniffing out the top short squeeze stocks and accumulating vast swaths of these holdings.
It led an entire cohort of mostly beaten-down holdings and growth stocks to explode higher. Led by names like GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC) and the now bankrupt Bed Bath & Beyond (OTCMKTS:BBBYQ), dozens of stocks experienced an explosive rally.
These short squeezes occurred off and on in short bursts for more than a year. Now investors are wondering if another round of short squeezes could come to life.
There’s been some rotation out of mega-cap tech into small-cap stocks and former growth stock winners. Are they going to turn into short squeeze stocks with upside? It’s always hard to know how long some of these rotations will last for. However, if it does continue, then we could see some larger upside moves.
Let’s look at a few potential short squeeze stocks for June.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) tumbled into 2023, found its footing and doubled, then came under strong selling pressure again. Now back in the bulls’ favor, Tesla stock has been screaming higher.
Shares are up more than 50% from the May low and have rallied in 16 of the past 18 sessions. In that span, it’s up in four straight weeks, while its two down days in that stretch were losses of just 1.5% and 1.6%.
Is a short squeeze driving the recent gains?
“Traders who have sold Tesla Inc shares short have lost about $6.08 billion on a mark-to-market basis during the electric car maker’s current winning streak,” according to the latest data from S3 Partners.
Further, “Tesla is the largest short in the world, according [to] S3’s head of predictive analytics Ihor Dusaniwsky, who says $22.43 billion worth of Tesla shares have been sold short.”
Carvana (CVNA)
Carvana (NYSE:CVNA) has been all over the place lately as volatility runs rampant. However, that’s not surprising given that this name was a leading bankruptcy candidate earlier this year. While Bed Bath & Beyond has bitten the dust, Carvana has not.
Shares fell 21% on Friday June 9, but that followed a 56% surge on Thursday. For the week, Carvana stock still gained more than 21%. Further, the stock is riding a six-week win streak.
Even with Friday’s decline, the stock is still up more than 180% in that span. At the week’s high, Carvana shares were up more than 300% in that span.
According to Fintel, the stock’s short interest is up to 64%.
The bets have been heating up that Carvana will go bankrupt. The bears argue that the company does not have the financials to survive and its inventory is creating extreme pressure on its bottom line. As bears pile in though, bulls are looking at CVNA as one of the potential short squeeze stocks.
C3.ai (AI)
C3.ai (NYSE:AI) is not necessarily the first stock to look at with short squeeze potential. That’s because it has a short interest of “just” 25% to 35% (depending on which data source you use).
However, when you factor in the stock’s recent momentum and the momentum with AI stocks, one can see where C3.ai would have some short-squeeze potential.
From the May 3 low to the May 30 high, C3.ai stock rallied more than 160%. The stock suffered a peak-to-trough two-day decline of 31% surrounding its earnings report. The problem? It was mixed.
While C3 delivered a top- and bottom-line beat, guidance left investors wanting more — especially given the blowout guidance print investors had recently received from Nvidia (NASDAQ:NVDA). Current-quarter guidance was disappointing, but C3’s full-year outlook was solid.
Will that leave more upside potential in play? It’s certainly possible, especially if the momentum in AI stocks remains strong and combined with C3’s elevated short interest.
On the date of publication, Bret Kenwell 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.
