Short-squeeze stocks may be the last thing on investors’ minds amid the ongoing tech sell-off battering the markets. Nearly every stock seems to be down at the moment, with steeper drops seen among more speculative names. The Nasdaq is flirting with correction territory, and former high-flyers have crashed back down to earth.

However, if you’re a contrarian with some risk capital to deploy, now could be an opportune time to scope out beaten-down stocks with sky-high short interest. The bears have pummeled these names. But many such short squeeze stocks could be approaching a bottom and primed for a major bounce once the market tide turns. Let’s take a closer look!

Trupanion (TRUP)

Trupanion (NASDAQ:TRUP) provides medical insurance for cats and dogs across the United States, Canada, Australia, Puerto Rico, and Brazil. The company has been struggling since the post-pandemic pet boom faded, with its stock trading sideways over an extended period.

It doesn’t help that Trupanion is unprofitable and has reported lackluster revenue growth. However, these factors alone don’t explain the company’s high short interest of 33%. Trupanion’s stock has already surged 26% over the past month, and analysts believe the company could achieve profitability within two years as losses are rapidly narrowing.

In its Q1 2024 earnings report, Trupanion reported a 19% increase in total revenue to $306.1 million and a 22% rise in subscription revenue. Some analysts, like Jon Block from Stifel, remain skeptical due to market share concerns. However, others see potential. Revenue will likely continue to slow, but a turn into positive territory for earnings should reduce the risk profile of this investment substantially.

Interest rate cuts could further accelerate Trupanion’s path to profitability. If the company delivers on expectations, I believe the bears could find themselves in a tight spot betting against TRUP stock.

Guess? (GES)

Guess? (NYSE:GES) designs, markets, distributes, and licenses lifestyle apparel and accessories for men, women, and children. The company has been executing well despite a challenging retail environment, delivering better-than-expected Q1 FY2025 results with revenue growth of 4% and adjusted earnings per share of -27 cents, which actually beat consensus estimates by 13 cents.

I think Guess has been a pretty boring company overall. GES stock has gained about 39% over the past five years without any big swings, barring the COVID shock. It’s even up 11% over the past year. Yet, short interest continues to hover around 36% of the stock’s float, which seems unwarranted. Sure, consumer discretionary stocks are under pressure. But Guess is managing inventory tightly and investing in growth initiatives like the rag & bone acquisition.

Any more positive developments could catch shorts off-side. While not without risks, I believe the heavy short interest in GES is overdone.

Upstart (UPST)

Upstart (NASDAQ:UPST) is the riskiest play on this list. I believe the main culprit behind its underperformance is not Upstart’s business model itself, but the pervasive sentiment of the broader market. Upstart has fallen victim to the banking sector’s weakness and reduced consumer borrowing due to high interest rates. While the current situation may seem gloomy, I think Upstart’s fate will change once interest rates begin to drop.

Interest rate cuts are likely to begin in September, and if rates continue to be cut from there, this environment should provide a substantial boost to Upstart. Analysts also expect the company to turn a profit next year. So, if Upstart meets expectations, it’s possible the company’s revenue could nearly triple over the 2024-2028 period.

Of course, investing in Upstart is not without risks. Upstart’s business model is still unproven in a higher-rate environment. However, some positive developments have taken place, with Texans Credit Union recently selecting Upstart for personal lending.

If you have a high risk tolerance and believe in the long-term potential of AI in the lending industry, Upstart could be worth considering for your portfolio. Just be prepared for a bumpy ride along the way. Short interest for UPST stock sits at 32% of float.

On the date of publication, Omor Ibne Ehsan 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.