Heavily shorted stocks are ripe for volatility. Regardless of the companies’ current bearish or bullish outlook, there is potential for gains. If the trading activity materializes a short squeeze, these stocks could get a rapid valuation bump as short-sellers are forced to cover their positions.
But this would then be followed by an equally rapid price drop. These companies have their shares shorted at very high levels, indicating a widespread expectation of declining performance.
CompoSecure Inc. – 50.73% float shorted
CompoSecure Inc (NASDAQ:) has been trading since April 2021 in the premium payment cards sector. Targeting affluent customers, the company provides customization features for high-end cards to fintech companies and banks. These metal cards with unique textures and finishes are designed to increase brand loyalty while also providing extra security with EVC Dynamic Security Code tech.
This market is reminiscent of the iconic business card scene in the American Psycho movie featuring Christian Bale, but for payment cards instead. In addition to this niche service, CompoSecure launched the Arculus platform to secure the storage of digital assets such as cryptocurrencies.
On September 17th, the company had a major shift in leadership with five new board members appointed alongside David Cote becoming executive chairman, as the former CEO of Honeywell (NASDAQ:). In August’s Q2 2024 earnings report, CompoSecure generated a 10% YoY increase in net sales to $108.6 million.
However, the company’s gross profit dropped from 55% to 52%, while net income only increased by 3% YoY to $33.6 million. Over the last three months, insiders traded CMPO shares at a 2.4 ratio on the selling side, having sold 47.5 million shares.
This aligns with the rapid CMPO valuation over the last three months, gaining 93.5% boost to the present price of $14.82 vs the 52-week average of $7.32 per share. According to 5 analyst inputs aggregated by Nasdaq, the current price level is close to CMPO median price target of $15.42 per share.
CN Energy Group Inc. – 76.66% float shorted
Covering renewable energy generation, pharmaceuticals and the production of recyclable activated carbon from biomass for environmental protection, China-based CN Energy Group Inc (NASDAQ:) started the year with a Nasdaq delisting notification. On September 6th, the company received “MVPHS Deficiency Letter” letter, standing for Market Value of Publicly Held Shares compliance.
CN Energy had 30 days to meet the minimum $1 million MVPHS requirement for at least 10 consecutive trading days, which was regained last Friday. The company’s current market cap is $1.91 million, with CNEY stock priced at $0.6437 per share.
Year-to-date, CNEY stock is down 64%, with the 52-week average price of $0.60. The highest price level in that period was $1.98 per share. Due to reported high debt load and cash burn, CN Energy is likely to experience further shorting.
Year-to-date, CNEY stock is down 64%, with the 52-week average price of $0.60. The highest price level in that period was $1.98 per share. Due to reported high debt load and cash burn, CN Energy is likely to experience further shorting.
(The) Children’s Place, Inc. – 56.05% float shorted
This New Jersey-based retailer sells children’s apparel and accessories, with stores typically near regional malls and shopping centers. In September’s Q2 earnings result, Children’s Place Inc (NASDAQ:) reported $32.1 million net loss, slightly lower than the $35.4 million net loss in the year-ago quarter. The company’s net sales decreased by 7.5%. Since Q1 2020, the company has been struggling to sustain profitability, having racked up $990.3 million in total liabilities against $921.4 million worth of total assets.
This is not surprising given the harsh competition from Walmart (NYSE:) alongside the shift to e-commerce, benefiting Amazon (NASDAQ:). This led to high inventory levels, which in turn led to markdowns and lowered profitability.
With that said, there is still some space for speculation as YoY gross margin rate increased to 34.8% vs 27.6% due to lower product input costs such as cotton and supply chain costs.
Currently trading at $11 per share, PLCE stock is under the 52-week average of $14.77 per share. Over the last three months, PLCE shares have experienced a 31% rally.
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