3 Short-Squeeze Stocks Ready for a Year-End Rally
Investors with short stocks are less prevalent within the market compared to average investors taking long company positions. However, they still play a massive role in a company’s overall share price trajectory. A short squeeze is a situation in which investors flood a stock with orders to purchase shares, and those who have a short interest must exit their short position by buying shares to limit their losses.
Below are a few companies with above-average short interest and are poised to continue growing for the remainder of the year. This may lead short position holders to buy shares to exit their positions to stop their losses, increasing the corresponding stock price.
Sprouts Farmers Market (SFM)
Source: Ken Wolter / Shutterstock.com
Sprouts Farmers Market (NASDAQ:SFM), headquartered in Phoenix, Arizona, offers natural and organic food products in its grocery store locations. They own and operate over 400 retail locations throughout the U.S., with multiple stores planned to open at the beginning of 2024.
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On Oct. 31, they released their earnings for the third quarter of 2023, which stated that their net sales rose by 8%, and their earnings per share were $0.61 per share, a 5% increase year-over-year. On the same day, they announced the appointment of a Curtis Valentine as Chief Financial Officer, who will take over on January 1, 2024.
Year-to-date, their share price has risen by 52% due to improved financial position, continued store expansion plan, and their new partnership with Uber. On Dec. 11, Sprouts announced that they would partner with Uber, and on-demand grocery delivery will be available for Sprouts customers through the Uber Eats app starting in Florida. On Dec. 12, Goldman Sachs (NYSE:GS) upgraded Sprouts Farmers Market from a Sell to a Buy rating due to better-than-anticipated execution. And their competitor Grocery Outlet Holdings (NASDAQ:GO) to a Sell from a Buy rating, citing slowing growth trends.
They also have an inflated short-interest position hovering around 17%. Still, with the recent spate of positive news surrounding the company, investors will be unlikely to drop Sprouts from their portfolio. This may lead to a short squeeze if their stock price keeps rising.
Abercrombie & Fitch (ANF)
Source: Paul McKinnon / Shutterstock.com
Abercrombie & Fitch (NYSE:ANF) is a retail company that produces apparel under their brands of Abercrombie & Fitch, Hollister, Social Tourist, and Gilly Hicks. It sells products through different methods, including its e-commerce platform, franchising, and wholesale.
Their share price has more than tripled year-to-date due to improved sales compared to their peers and robust management structure. On November 21, it reported earnings for the third quarter of 2023, in which it stated sales growth among its two flagship brands, Hollister and Abercrombie, of 11% and 30% compared to the previous year, respectively. In the third quarter of 2022, they reported a net loss of $700,000; in Q3 2023, they reported a net income of $97 million. The U.S. and other international regions all had double-digit sales growth year-over-year.
Abercrombie & Fitch has seen a record year in growth, even in a high-interest rate environment, which isn’t conducive to improved consumer spending. It will be interesting to see if their rally will continue with their reported short interest of 15%.
Ardelyx (ARDX)
Source: shutterstock.com/Champhei
Ardelyx (NASDAQ:ARDX), headquartered in Waltham, Massachusetts, is a biopharmaceutical company that produces various therapies for treating gastrointestinal diseases. Their flagship medication is Ibsrela, an oral medication for the treatment of irritable bowel syndrome, and Xphozah, their new oral medication that is supposed to lower a patient’s phosphorus levels and help treat chronic kidney disease (CKD) which, back in October, received FDA approval.
Their share price fell dramatically in 2021 following negative regulatory news from the FDA regarding their chronic kidney disease serum treatment. Since this event, the stock has seen consistent growth, and its share price has more than tripled. Currently, they have approximately 17% short interest in their company.
On Oct. 31, their earnings report for the third quarter stated that total revenue surged by 11-fold compared to the year before, which was fueled mainly by an increase in sales of Ibsrela, which is expected to see full-year 2023 revenue between $76 million to $78 million. Investors will be looking to see if their new medication, Xpozah, will be another revenue catalyst like Ibsrela.
As of this writing, Noah Bolton held a LONG position in ANF. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Noah has about a year of freelance writing experience. He’s worked with Investopedia dealing with topics such as the stock market and financial news.
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