3 Electric Vehicle Stocks With Short Squeeze Potential
The electric vehicle market has recently become one of the most popular sectors for risk-tolerant stock traders. Currently, these companies have a combined market cap of several trillion dollars, with the majority of the market cap coming from Tesla (TSLA) – Get Tesla Inc Report, Lucid (LCID) – Get Lucid Group, Inc. Report, and Rivian (RIVN) – Get Rivian Automotive, Inc. Class A Report. These well-financed, deep-pocketed brands are seen by many as the leaders of this new era of the automotive industry.
However, despite these success stories, the volatility of the EV marketplace has also spread some uncertainty among investors and market speculators. In some cases, EV stocks have become a target of short-selling, including stocks like Canoo (GOEV) – Get Canoo Inc. Class A Report, Workhorse (WKHS) – Get Workhorse Group Inc. Report, and Blink Charging (BLNK) – Get Blink Charging Co Report.
Though there is still quite a bit of market speculation, some leading traders suspect these highly shorted stocks may also be on the edge of a short squeeze—if multiple short-sellers are forced to exit their position at the same time, each of these companies’ underlying stock prices might experience a sudden spike in value.
(Read more from Wall Street Memes: AMC Stock: More Popular Than Tesla, Apple, Amazon, and Google)
3# Canoo – $GOEV
Canoo went public via a SPAC (special purpose acquisition company) merger in late 2020, during what was then known as the “SPAC Boom.” Since the acquisition, skepticism has been building, leaving many investors wondering whether the initial investment opportunity has been overhyped. Early this year, the downfall of SPACs, as a broader asset class, may also be a factor that is leaving both risk-tolerant and risk-averse investors feeling pessimistic about the company’s future.
The company initially gained notoriety for its fully electric trucks, which has helped it gain popularity online as a “meme stock.” Canoo has a current short rate of 27% of the float, a figure that is relatively high. The company claims it is “creating a greener planet and reinventing the automotive industry by bringing bold electric vehicles to everyone” but ongoing cashflow issues seem to be preventing it from fulfilling this ambitious mission.
Public skepticism of the electric vehicle industry certainly has not helped Canoo achieve its growth goals. Compared to traditional vehicle manufacturers, regulatory and policy matters are much more important (and unpredictable) factors to consider before investing. Without anything particular impressive about the company beyond its mission, it is someone unsurprising it has become such a target of short-sellers.
2# Workhorse Group – $WKHS
The electric truck startup manufacturer Workhorse drew investor interest after becoming one of the finalists in the lucrative $6 billion US Postal Service contract to replace its truck fleet. With the support of a large government entity, the future for Workhorse initially appeared to be quite bright. However, the company ended up as a runner-up after losing the contract to its competitor Oshkosh Defense (OSK) – Get Oshkosh Corp Report
Largely due to supply chain issues affecting truck production since the first quarter of this year, the company has also been failing to beat earnings and revenues estimates—by wide margins. In last quarter’s earnings report, the company reported a net loss per share of $0.77, which was 43 cents below expectations. The company also generated negative revenues of $576,600, which was partially attributed to its need to recall a fleet of vans.
To pessimistic investors, the high short interest of nearly 28% is fairly easy to justify. However, Wall Street consensus on WKHS stock is currently a moderate buy with an average price target of $10.50, which implies a nearly 100% upside for the future.
One of the latest reports on Workhorse came from B. Riley Financial analyst Christopher Souther, who reiterated his buy recommendation on WKHS after Q3 earnings. The analyst reduced his price target to $13 from $20, still suggesting 80% gains ahead. He sees potential for the company to gain early footing with key customers as it ramps up van production.
1# Blink Charging – $BLNK
Although not an electric vehicle manufacturer, Blink provides EV charging equipment and networked EV charging services in the United States. Like the other companies mentioned above, Blink has been subject to a notably high level of short-selling over the past quarter. Blink Charging (BLNK) – Get Blink Charging Co Report is a $1.39 billion market cap company, and its businesses are very sensitive to environmental issues and legislative directives, which can increase volatility in an unpredictable political climate.
Blink Charging business could also be vulnerable as electric vehicles become more popular and gas stations and convenience stores install EV charging stations on their own, essentially eliminating the unique value that Blink can provide. Ultimately, the company’s success relies on the achievements of business-to-business contracts in the increasingly competitive EV marketplace. The company has a very high short interest of nearly 37% of its 36 million shares float—notably higher than the rates found at both Canoo and Workhorse.
Last few words
Generally speaking, short squeezes are most likely to occur when there is strong buying pressure and a high short interest of 20% or above. Therefore, all three companies mentioned above could become targets of short squeezes, which can potentially occur within the next few months.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)