With the ongoing GameStop saga reigniting interest in meme stocks, investors, or more likely traders and speculators, are once again seeking out stocks with high short interest. As the overall market, the technology sector, and many global-leading household stocks trade near all-time highs, trader's appetite for risk and speculative plays may be increasing.
That's where these four stocks, with a considerable short interest, come in. Here, we look closer at four highly shorted stocks that are not penny stocks, exploring whether they might experience significant moves due to their short interest levels.
It's important to remember that investors often perceive heavily shorted stocks as fundamentally flawed, significantly overbought, and overvalued. Those who short these stocks typically believe the market has overpriced them relative to their financial health and growth prospects. So, while a stock with a high short interest could mean a short squeeze is looming, it should also raise an alarm bell for a potential investor. Take a look at four large-cap stocks with significant short interest below.
Novavax Inc.: A Leader in Vaccine Development
Novavax (NASDAQ: NVAX) is a biotechnology company that develops vaccines and biological therapies to combat infectious diseases. The stock has surged an astounding 233% YTD, driven by a $1.3 billion deal and potential approval of its COVID-19 vaccine. On May 14, Novavax inked a licensing deal with Sanofi, including a $500 million upfront payment, up to $700 million in milestone payments, and a $70 million investment in Novavax stock. As of May 15, NVAX is one of the most shorted stocks, with a short interest of 32%, equating to 45 million shares sold short, up nearly 1% from the previous month.
Upstart Holdings, Inc.: Revolutionizing AI-Powered Lending
Upstart Holdings (NASDAQ: UPST), a leading fintech company, operates a cloud-based AI lending platform in the United States. The stock has a significant 34% short interest, increasing by 7% month-over-month. The stock is down nearly 42% YTD, with no signs of recovery, and has fallen almost 7% over the last month. Analysts remain bearish, with a consensus reduce rating and a price target predicting a further 9% downside.
C3.ai, Inc.: Pioneering Enterprise AI Solutions
C3.ai (NYSE: AI) offers AI solutions for enterprise optimization and decision-making. Despite lagging the market with only a 9% YTD gain, the stock surged over 30% in the last month due to strong Q4 earnings, where revenue rose 20% year-over-year to $87 million. Despite these positive results, short interest remains high at 28%, or 34 million shares sold short, an increase of over 3% from the previous month. Analysts maintain a neutral stance with a consensus Hold rating and a price target close to the current stock price.
Comstock Resources, Inc.: Leading Independent Energy Company
Comstock Resources (NYSE: CRK) is an independent energy company focused on natural gas and oil production in the United States. CRK shares have risen nearly 36% YTD and almost 20% in the last month. Despite this performance, sentiment is bearish, with analysts maintaining a consensus Hold rating and a price target forecasting nearly 14% downside. The stock has a short interest of almost 35%. A notable factor is the lack of insider selling over the past year, with one insider purchasing $100 million worth of stock in Q1.
The Bottom Line on High Short Interest Stocks
As meme stock mania continues, stocks with high short interest, like Novavax, Upstart, C3.ai, and Comstock Resources, may attract renewed interest from those hoping for a short squeeze. Monitoring these stocks for potential short squeezes could provide valuable opportunities amid the broader market's strength. Still, it's also imperative to remember that a high short interest might signal an overbought scenario and potentially a fundamentally flawed company.
