Short-squeeze stocks are making headlines as the collective action of the Reddit community provides positive momentum for their share prices. However, many dive into these stocks without researching tangible data. Therefore, today’s article will discuss seven short-squeeze stocks as well as their fundamental metrics so that interested investors can make better informed decisions.
Institutional investors such as hedge funds use short selling as a trading strategy, betting that a given stock will decline in value. During a short-squeeze trade, “large inflows of funds into a stock price make any short position on the stock untenable.” The volatility and high trading volume in such short-squeeze stocks in 2021 have been an eye-opening experience for most of us.
Some courageous investors have also made considerable amounts of money by riding these rallies. For instance, year-to-date, a number of such shares have seen triple- or even quadruple-digit gains. Notable names include:
- AMC Entertainment (NYSE:AMC) — up about 2,340% year-to-date (YTD);
- Blackberry (NYSE:BB) — up about 78% YTD; and
- GameStop (NYSE:GME) — up about 972% YTD.
Recent research led by Cheng Long of Trinity College Dublin, Ireland, highlights, “GameStop’s experience has been portrayed in the media as a war between amateur investors and the Wall Street giants.” The rest of the year is likely to see similar short-squeeze moves in other companies.
With that information, here are seven short-squeeze stocks to research further in July:
- Carver Bancorp (NASDAQ:CARV)
- Clene (NASDAQ:CLNN)
- GoodRx (NASDAQ:GDRX)
- iRobot (NASDAQ:IRBT)
- Sequential Brands (NASDAQ:SQBG)
- Tanger Factory Outlet Centers (NYSE:SKT)
- Upstart (NASDAQ:UPST)
On a final note, buying short-squeeze stocks could be risky and thus would not be appropriate for all investors. Paying way above a company’s fundamental value in hopes of a squeeze of one kind or another isn’t exactly a dependable long-term investing strategy.
Short Squeeze Stocks: Carver Bancorp (CARV)
52-week range: $5.15 — $19.21
Carver Bancorp is the holding company for the federally chartered Carver Federal Savings Bank. Carver Federal was founded in 1948 to serve communities with limited access to mainstream financial services. The bank, headquartered in Harlem, New York City, had approximately $676.7 million in assets and 104 employees as of March 31, 2021.
At the end of June, the bank released quarterly metrics. Total loans grew by 13% year-over-year (YOY) to $478.4 million. Deposits rose 14% YOY and came in at $556.6 million. Net interest income remained almost flat at $16 million but net interest margin was squeezed from the Q1 2020 level of 2.95% to 2.49% in Q1 2021. The bottom line remained in the red, recording a $3.9 million net loss. Accordingly, diluted losses per share were $1.14.
Management highlighted, “The Bank remains dedicated to expanding wealth-enhancing opportunities in the communities it serves by increasing access to capital and other financial services for consumers, businesses and non-profit organizations, including faith-based institutions.”
So far in the year, CARV stock is up more than 62%. On June 14, it saw a multi-year high of $19.21. Now, it is hovering around $10.5. Market capitalization for the company stands at $36.8 billion. Wall Street is debating whether the share price will continue to decline as quickly as it rose.
Clene (CLNN)
52-week range: $6.23 — $17.50
Clinical-stage biopharma group Clene focuses on neurodegenerative diseases by using nanotechnology. Its leading drug candidate, CNM-Au8, is being investigated for efficacy and safety in a Phase 3 registration trial for ALS and in Phase 2 trials for multiple sclerosis and Parkinson’s disease.
Clene announced Q1 results on May 11. Revenue was $213,000 while net losses came in at $39.8 million, or 66 cents per share. A year ago, net losses had been $3.9 million, or 23 cents per share. Clene’s cash totaled approximately $48 million at the end of March.
CEO Rob Etherington commented:
“During the first quarter, we announced compelling interim data in MS patients indicating that CNM-Au8 has a homeostatic effect on brain bioenergetics, which may allow it to ultimately slow or halt disease progression. We also received important external validation for our Parkinson’s Disease program in the form of a grant from the Michael J. Fox Foundation that will enable us to accelerate CNM-Au8’s development in this high unmet need indication.”
Over the past six months, CLNN stock is up about 20%. But the shares have lost considerable ground from the all-time-high (ATH) of $17.50 hit in December 2020. They are now shy of $11.
Investing in clinical-stage biopharma firms is a high-risk, high-return proposition. There are currently few treatment options for the illnesses Celene is targeting. However, it is too soon to know that the end result will be.
On a final note, InvestorPlace.com readers might be interested to know that the stock has been recently added as a member of the U.S. small-cap Russell 2000 Index and the all-cap Russell 3000 Index.
GoodRx (GDRX)
52-week range: $26.66 — $64.22
Consumers looking for the best deals on prescription drug purchases are likely familiar with Santa Monica, California-based GoodRx. This company operates a price comparison platform that helps U.S. residents save money on medication. GoodRx was founded in 2011 and went public in September 2020.
As services are free to consumers, GoodRx primarily earns revenue from two sources, namely, “Advertisements on their site and a percentage fee every time a GoodRx coupon is used at the pharmacy.” Over 80% of revenues come from transaction fees when a pharmacy accepts a discount GoodRx code presented by the consumer to fill a prescription. This company has also started offering telehealth services and its app is one of the most downloaded health apps.
According to the latest Q1 financials announced on May 13, top line grew by 20% YOY to $160.4 million. Bottom line, on the other hand, decreased by 94% YOY to $1.7 million. The decline is mainly attributable to the stock based compensation expenses, including nonrecurring expenses related to the IPO.
Adjusted net income was $31.8 million compared to $33.2 million of Q1 2020. Cash provided by operating activities remained flat at $45.5 million. Management’s Q2 2021 and FY21 revenue range guidance was $172-176 million and $740-760 million, respectively.
YTD, GDRX shares are down about 16%. Following the IPO, the stock hit a record of $64.22. But now, it is shy of $35. Forward price-to-earnings (P/E) and price-to-sales (P/S) ratios stand at 95.2 and 23.0, respectively.
Wall Street seems to agree that GoodRx platforms delivers a degree of affordability to consumers. However, the jury is out on whether the stock is a good prescription for long-term portfolios.
iRobot (IRBT)
52-week range: $67.55 — $197.40
iRobot builds robots tailored for consumer use around the home in activities such as cleaning, mapping and navigation. The group is one of the leading names in the global consumer robotics market, which ” generated revenues of USD 4,122 million in 2019 and is expected to touch USD 32,800 million in 2027.” Its lineup of “Roomba” robot vacuums are used widely.
The company announced first quarter financial report at the beginning of May. Revenue was $303.2 million, compared to $192 million in the first quarter of 2020. Adjusted net income was $7.4 million, compared to an adjusted net loss of $18 million a year ago. Cash and equivalents ended were $500 million.
On the results, CEO Colin Angle stated, “We have increased our expectations for 2021 revenue to reflect our first-quarter performance and solid growth prospects over the coming quarters. At the same time, we have reaffirmed our 2021 operating income and EPS as we plan to carefully manage our spending to offset higher-than-expected costs arising from the tighter availability of semiconductor chips as well as rising raw material, freight, and transportation costs.”
Management expects to generate $1.67 to 1.71 billion total revenue in 2021, translating into an EPS of $1.85-$2.10 at the end of the year.
IRBT stock returned 13$ YTD and hit an ATH in January. Forward P/E and P/S ratios stand at 36.90 and 1.77, respectively. Growing competition in the consumer robotics market could drive margins lower.
Sequential Brands (SQBG)
52-week range: $4.14 — $40.49
New York based Sequential Brands Group owns and licenses a portfolio of consumer brands in the active and lifestyle categories. Revenues come from royalties collected. My InvestorPlace colleague William White recently covered this company in some detail. Readers should note that the market capitalization currently stands at $26 million.
In mid-April, Sequential Brands released its Q4 financial results. Revenue was $22.9 million, showing a decline of 5.3% YOY. Bottom line remained in red and net loss for Q4 2020 was $4.5 million. Loss per share for the quarter was $2.70. Sequential ended the year with $15.5 million in cash.
So far in the year, SQBG is up 9%. Forward P/E and P/S ratios stand at 0.91 and 0.29, respectively. Recent weeks have seen differing speculation that the business could either be a takeover candidate or going bust.
Tanger Factory Outlet Centers (SKT)
52-week range: $5.46 — $22.40
Tanger Factory Outlet Centers owns and operates more than 30 open-air outlet centers in the U.S. and Canada. As a real estate investment trust (REIT), this company focuses on developing and managing outlet shopping centers. Due to the pandemic, foot traffic and rent collections have come under significant pressure.
The group announced first quarter financial results at the beginning of May. Total revenue was $100.6 million, compared to $111 million on first quarter of 2020. Adjusted net income was $4.3 million, compared to an adjusted net loss of $28.1 million on the same period of 2020. Adjusted net income per diluted share was 4 cents in Q1 2021 vs. adjusted net losses per diluted share of 30 cents in Q1 2020. Cash and equivalents came at $201.7 million.
On these results, CEO Stephen Yalof remarked:
“We remain committed to maintaining a strong balance sheet. During the first quarter of 2021, we opportunistically generated nearly $130 million in net proceeds from the issuance of equity, and year to date, we have reduced debt by $175 million, creating additional financial flexibility.”
Management expects a diluted EPS between the range of 13 cents and 23 cents for the end of the year 2021. Pent-up demand has lately seen shoppers return to open-air malls. SKT stock is up about 91% in 2021 and the current price supports a dividend yield of 3.7%. Forward P/E and P/S ratios are 46.08 and 4.54, respectively.
Analysts are debating whether the shares should be trading at such valuation levels given how its underlying metrics have deteriorated in the past several quarters.
Upstart (UPST)
52-week range: $22.61 — $191.89
Upstart is an artificial intelligence (AI)-powered lending platform. Founded in 2012, this company went public in December 2020. With a market cap of $9.3 billion it is a small but growing financial technology (fintech) group. The peer-to-peer (P2P) lender partners with banks and focuses on young adults as clients.
According to Q1 financials released on May 11, top line grew by 90% YOY to $121 million. Adjusted net income was $19.9 million and adjusted EPS was 22 cents. Contribution margin for the period was 48%. CEO Dave Girouard cited, “Upstart is delivering a combination of growth and profits that is rare in FinTech and in the technology industry overall.”
For Q2 2021 the company expects to generate $150-160 million revenue and $8-12 million net income. For the full year, the company revised its prior guidance of $500 million for the top line to $600 million. Contribution margin was also revised upwards from 41% to 42%.
Current P/S and price-to-book (P/B) ratios are 32.08 and 29.08 respectively. Such a rich valuation will not be suitable for all portfolios.
On the date of publication, Tezcan Gecgil did not have (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.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.