For a perfect example, remember the infamous Zoom Video Communications (NASDAQ:ZM) snafu when investors bought the wrong ticker in the pandemic’s early days. The resulting surge in Zoom Technologies — which is now delisted — sparked aggressive short-selling based on a fundamental misalignment. That misalignment applied to two of this week’s short-squeeze stocks, but in both cases, short sellers took it too far with decent companies and set them up for a potential surge.
C3.ai (AI)
Short interest remains high for enterprise-focused artificial intelligence firm C3.ai (NYSE:AI), with about 33% of the float shorted. C3.ai has been near the top of most short-interest screeners, but not based on pure potential. Instead, investor sentiment toward C3 AI spiked during the artificial intelligence boom’s onset based on the unique ticker — AI — and the ongoing short interest is trying to capture the reversal as other, larger artificial intelligence firms take the main stage. A solid trade, to be sure, but the time to short C3 AI was likely in mid-2023 when shares spiked and neared $46. Since then, per-share pricing dropped to around $30. That’s a much more reasonable valuation that ultimately sets C3.ai up as a short-squeeze stock.
Blink Charging (BLNK)
With a March 14th (after-hours) earning report on the horizon, investors are shorting Blink Charging (NASDAQ:BLNK) based on the assumption that lagging electric vehicle (EV) sales mean that business is bad for Blink. That is a reasonable assumption, but one made too late. The best time to short Blink and other EV charging stocks like ChargePoint (NYSE:CHPT) was last summer when Tesla (NASDAQ:TSLA) and General Motors (NYSE:GM) announced a joint charging initiative. That served as a catalyst sparking wider EV charging stock suppression and Blink shares are down by about 50% since then. But, now that Blink is close to penny stock territory, the 30% short interest points to investors chasing pennies in front of a steam roller — the steam roller, of course, being Blink’s potential as a short-squeeze stock.
Expect even a modest earnings beat to send Blink shares upward, potentially triggering the short-squeeze stock’s initial surge upward as investors fight to close losing positions. With a history of beating analyst expectations for four of the past five quarters and a planned manufacturing expansion to 50,000 charging units annually (from 15,000 annually today), big news is brewing for Blink and short-squeeze stock investors.
Imperial Petroleum (IMPP)
Imperial Petroleum (NASDAQ:IMPP), with a 75% short interest, ranks as one of this week’s top short-squeeze candidates, especially since many analysts see little fundamentally “wrong” with the stock. As the market’s second-most shorted stock, behind B. Riley Financial (NASDAQ:RILY), IMPP operates a relatively small fleet of refined oil transport tankers. Nevertheless, the company’s merits as a solid small-cap value stock stand firm before factoring in its potential as a short-squeeze stock.
The earnings report released on February 13th, detailing the fourth quarter and the entire fiscal year 2023, highlights Imperial Petroleum’s appeal both as a small-cap value investment and a strong short-squeeze contender. Despite a somewhat lackluster fourth quarter, the year-end financials reveal impressive gains, with nearly 90% revenue growth and a 141% increase in net income since 2022. Additionally, the company is using its substantial cash reserves to benefit shareholders, continuing a $10 million buyback program throughout the quarter.
That aspect is particularly significant given Imperial’s status as the second-most heavily shorted stock and its 8% increase in share price over the last month, bringing it somewhat out of penny stock territory. By repurchasing shares at these lower prices, IMPP’s management enhances shareholder value and sets the stage for a potentially explosive short-squeeze event.
On the date of publication, Jeremy Flint held no positions (directly or indirectly) in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.