Short squeeze rallies can be massive at the blink of an eye and provides investors with attractive trading opportunities. Currently, there are several deeply oversold stocks that have a high short interest as a percentage of free-float. However, not all names are short squeeze stocks that can skyrocket in quick time.
There will be names with a high short interest that continue to trend lower. The point I want to make is that even while taking a speculative position, there needs to be some consideration on fundamentals. Stocks that represent companies with weak fundamentals and no business catalysts are unlikely to remain in a downtrend.
The focus of this column is therefore on stocks that represents companies with decent business fundamentals. Furthermore, these stocks are oversold and are likely to have a strong reversal rally that will be supported by the short squeeze.
Let’s discuss the reasons to expect a rally in these short squeeze stocks.
Blink Charging (BLNK)
Blink Charging (NASDAQ:BLNK) stock has already witnessed some positive price action with a rally of 33% from recent lows of $2.18. Backed by strong financial developments, I am positive on BLNK stock surging higher from deeply oversold levels.
Recently, Blink Charging announced preliminary results for Q4 2023. The company’s revenue for the quarter is likely to be more than $42 million. Further, full-year revenue is likely to be ahead of the guidance. However, the biggest positive is that Blink Charging has reaffirmed the target to achieve EBITDA break-even by December 2024.
It’s worth noting that Blink is already reporting stellar revenue growth. If this is associated with significant EBITDA margin expansion, BLNK stock is likely to go ballistic. As recurring (software and related services) revenue swells, there is a strong case for sustained margin expansion. It’s therefore a good time to buy the stock, which still has a high short interest.
Beyond Meat (BYND)
Beyond Meat (NASDAQ:BYND) stock was among the hot favourites until the beginning of 2021 and was trading around $200. The stock has however witnessed sustained correction and currently trades at $7.6. After the big slide, the seller of plant-based meat products looks attractive. I would bet on a 40% to 50% short squeeze rally from current levels.
For Q3 2023, Beyond Meat reported revenue de-growth of 8.7% on a year-on-year basis to $75.3 million. United States net revenue declined 30.8%, which was partially offset by a 58.7% growth in international revenue to $32.3 million. Growth in Europe is one encouraging sign amidst headwinds for the company.
It’s also worth noting that Beyond Meat is focused on reducing its operating expense base. For now, the focus has shifted to creating a profitable business than growth at any cost. Potential improvement in EBITDA margin is a catalyst for BYND stock upside in the coming quarters.
Beyond Meat continues to focus on innovation that’s likely to drive long term growth. The company recently unveiled Beyond IV product lines that are a “result of a multi-year research effort in collaboration with leading medical and nutrition experts.”
Lucid Group (LCID)
I must mention at the onset that Lucid Group (NASDAQ:LCID) stock is not worth holding among EV stocks even after the big plunge. At best, I would look at LCID stock for some quick trading opportunities. In the last 12 months, the stock has plunged by almost 70%. The short interest remains above 30%.
While EBITDA losses have sustained, Lucid Group reported a liquidity buffer of $4.78 billion. It remains to be seen if cost cutting translates into narrowing of EBITDA level losses in the current year. It’s also worth noting that Lucid Gravity production is likely towards the end of 2024. If production growth guidance looks better for the next year, there is a case for a sustained rally.
However, as mentioned earlier, I would not be betting on Lucid for long-term value creation. I see multiple equity dilutions coming before EBITDA break-even.
On the date of publication, Faisal Humayun 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.