While it seems like a million years ago now, who can ever forget the incredible rise of GameStop (and other highly shorted stocks) starting in January of 2021 and again later that year? A stunning 140% of the company’s float had been sold short by hedge funds and short sellers. It was noted later by Goldman Sachs that more than 100% of a company’s float being sold short had only happened 15 times in the prior 10 years.
When investors, both large and small, started to buy GameStop and push the price higher, the trading action snowballed and the stock, which had been trading for years in the $1 to $2 range, exploded higher as the massive amount of shorts were forced to cover their short-sale positions by buying the stock to replace their borrow. By January 28, the stock had exploded to an intra-day high of a stunning $500 (split-adjusted to $125).
By the middle of February, all the gains were given back, but by then the damage had long since been done. Reddit’s WallStreetBets crowd, which started buying the stock anywhere from $2 to $10 in early January, poured on the pressure and the massive 140% of float acted as a parabolic rocket, moving the stock to a (split-adjusted) intra-day high of $120.75 by the 25th of January, and by 15th of February, it closed back at $10.15.
Some hedge funds and active short sellers were ruined, and all-in it was reported that short sellers at the time lost a stunning $6 billion. While that kind of incredible short-squeeze is a one-in-a-million play, there are others out there that could be ready to explode. We ran our 24/7 Wall St. short interest screens to find the stocks that had the highest current short interest. We then screened for the stocks that had positive fundamentals and were Buy rated across Wall Street. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
All short interest totals are from June 15, 2023.
Carvana
This stock was a high-flier that has come back to earth and offers big upside potential. Carvana Co. (NASDAQ: CVNA) operates an e-commerce platform for buying and selling used cars in the United States.
The company’s platform allows customers to research and identify a vehicle; inspect it using the company’s 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices.
With a stunning 57% of the float sold short, more positive news could push the shares higher. Piper Sandler’s price target of $21 is above the consensus target of $14.58 but below Thursday’s closing print of $25.74, which was down over 8% for the day.
Novavax
This small biotech stock has taken investors on a roller-coaster ride over the past three years but could be ready for a big move higher. Novavax Inc. (NASDAQ: NVAX) promotes improved health by discovering, developing and commercializing vaccines to protect against serious infectious diseases. It offers a vaccine platform that combines a recombinant protein approach, nanoparticle technology and its patented Matrix-M adjuvant to enhance the immune response.
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