Short squeezes, particularly impactful in short-squeeze stocks, take place when a significant number of traders, who have shorted a particular asset, are compelled to close their positions. This way, shares of these companies surge higher due to repricing.
For those retail traders who want to identify potential stocks for a short-squeeze rally, a closer look at short interest data is imperative. Specifically, the short interest ratio, a metric revealing the proportion of shares held short in a stock relative to its average daily trading volume, plays a crucial role.
The short interest ratio is calculated by dividing the number of shares held short by the stock’s average daily trading volume. Along these lines, a short interest exceeding 20% of the float is generally considered high. Bottom line, this ratio offers a swift indication of a stock’s short interest, providing insights into market sentiment.
As the price initially rises, short sellers, initially betting on the security’s decline, face mounting losses. In response, some may choose to cut their losses and exit their positions, intensifying the price increase. This snowball effect tends to facilitate a sharp and powerful upward move.
Fisker (FSR)
Fisker (NYSE:FSR), a prime candidate among short-squeeze stocks and an electric vehicle producer, has carved a niche in the automotive landscape with its commitment to sustainable and stylish mobility solutions. Founded by automotive designer Henrik Fisker, the company focuses on creating environmentally conscious vehicles without compromising on luxury and performance.
Renowned for its innovative designs, Fisker emphasizes cutting-edge technology and eco-friendly materials in its EV lineup. The company’s flagship model, the Fisker Ocean, boasts a strong emphasis on aesthetics and sustainability.
This EV stock surged on the last trading day in 2023 after Fisker reported a strong surge in electric vehicle deliveries, witnessing a four-fold increase in the final quarter, totaling approximately 4,700 vehicles for the year.
Robust sales were predominantly fueled by strong demand for the Fisker Ocean SUV, priced at $69,000, with initial deliveries to U.S. customers commencing in June. The company plans to unveil a strategy in January aimed at bolstering sales and aligning production capacity with the robust demand for the Ocean SUV. Fisker successfully manufactured 10,142 vehicles in 2023.
Still, its stock ended the 2023 sharply lower as smaller EV firms grappled with dwindling cash reserves due to production costs and demand-driven price cuts. In an improving macro, these stocks could see a higher-than-expected demand as the stock market rally broadens to involve smaller stocks. The short interest ratio exceeds 45%, which is extremely high.
Beyond Meat (BYND)
As we continue exploring notable short-squeeze stocks, Beyond Meat (NASDAQ:BYND) stands out as it attempts to revolutionize the food industry with its sustainable, plant-based alternatives. Founded in 2009, the company’s commitment to environmental stewardship and health-conscious choices has propelled its popularity, especially among sustainability-focused investors.
Beyond Meat’s diverse product line includes burgers, sausages, and more, replicating the taste and texture of meat with plant-based ingredients. Aiming to reduce the ecological footprint of food production, Beyond Meat has garnered widespread attention and secured partnerships with major retailers and restaurants.
Still, the company’s stock fell nearly 28% year-to-date amid financial struggles and weakening demand for plant-based products. Back in November, Beyond Meat slashed its net revenue guidance for the full year. The company also announced it will pursue “significant” expense reductions including a 19% reduction in non-production headcount.
Beyond Meat sees full-year revenue at $335 million (up or down $5 million), down from the prior $370 million and the consensus of $366 million. The company is due to report earnings and update its guidance in February, which could invite heightened volatility. The stock has a short interest ratio of 42.2%.
Plug Power (PLUG)
Among other notable short-squeeze stocks, Plug Power (NASDAQ:PLUG) is a major player in the hydrogen fuel cell industry, and has been instrumental in advancing clean energy solutions for various sectors. Established in 1997, the company specializes in fuel cell technology, providing hydrogen-based power solutions for electric vehicles and industrial applications. Plug Power’s fuel cell systems enhance efficiency and reduce carbon emissions, contributing to sustainable energy practices.
Shares lost nearly two third of its value in 2023 after the company issued a going-concern warning, which is a note or disclosure in a company’s financial statements that raises doubts about the firm’s ability to continue its operations in the foreseeable future.
This warning is issued when there are significant concerns about the company’s financial health, such as persistent losses, liquidity problems, or other issues that may jeopardize its ability to meet its financial obligations. As a result, the stock accelerated losses in the final quarter of the year. The short interest ratio stands at almost 30%.
The stock could realistically attract demand in an improving macro environment, which could alleviate investor concerns about the company’s ability to continue functioning. An improving risk sentiment is also more likely to spur demand for hydrogen fuel cell industry as businesses shift focus away from macro concerns amid expectations central banks will soon start cutting rates.
On the date of publication, Shane Neagle 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.
