Dog-inspired meme cryptos are one thing, but the rally we’ve seen in many meme tokens appears to be spreading to the equities world. Petco (NASDAQ:WOOF) is the latest company to see a surge in retail investor interest. Today, WOOF stock is up more than 24% in early afternoon trading as investors brace for what could be an impending short squeeze.
According to data compiled by Fintel, with a very high short interest ratio of more than 33%, there are clearly the right elements in place for such a squeeze to take place. Indeed, there are a number of much more highly-shorted stocks in the market. But this factor, as well as a relatively limited float, a small market capitalization, and a low share price, could mean options traders have a key target they’re honing in on.
We’ve seen some impressive interest in short squeeze bets pick up this year. Let’s dive into whether this rally in WOOF stock can be sustained or if it’s likely a flash in the pan.
WOOF Stock Surges on Short Squeeze Interest
In addition to the right fundamental pieces in place, reports today suggest that Petco insiders are buying this stock heavily. Recent Securities and Exchange Commission (SEC) filings revealed that the company’s executive chairman and a member of Petco’s board are in buying mode. Generally speaking, insider buying activity is much more telling about how a company’s management team feels about its prospects, and investors are taking notice.
These purchases weren’t small in nature, either. And while the executive chairman appears to have been granted his shares, it’s clear that insiders remain bullish on the forward-looking prospects of this pet wellness company.
In addition to other companies in this sector, Petco has been hit hard by assertions that spending on pets may decline if stuff hits the fan in the macro world and a recession really takes hold. I think there’s certainly something to that thesis, and there’s a reason this stock is heavily shorted. However, at some point, these beaten-down stocks become attractive. And when insiders buy heavily and shares are this shorted, these sorts of near-term spikes can happen.
I’m not sure this move is sustainable, but WOOF stock is certainly one to keep on the watch list for now. I’ll be following up on how this stock performs in the coming weeks and aim to provide updates as they come.
On the date of publication, Chris MacDonald 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.
