This Week’s Top 3 Short-Squeeze Candidates

Stocks to buy

Short-squeeze opportunities tend to be rarer today than in years past. Rapid, high-frequency trading and automated management systems mean that short sellers can monitor a stock’s status to step in before short squeeze conditions align. Still, some shorted stocks offer quick upside as shorts close their position. And, the likelihood of a short squeeze increases with the overall short interest (of course) as well as the company’s fundamental strength.

This means that the best short-squeeze candidates aren’t meme stocks or perennially unprofitable. Instead, if you’re looking for short-squeeze stocks, find ones that are in a uniquely bearish position that ultimately conceals their underlying strength.

Imperial Petroleum (IMPP)

Source: shutterstock.com/Me dia

At 75% short interest, Imperial Petroleum (NASDAQ:IMPP) stands out as one of the week’s best short-squeeze candidates, considering – for many analysts – there’s little materially “wrong” with this stock. The most shorted stock on today’s market, IMPP owns and operates a handful of tankers that transport refined oil. Regardless, the company is small and owns just nine tankers. Still, size aside, the stock is a solid small-cap value pick on its own before even considering its short-squeeze status.

The company’s February 13th earnings report, covering the year’s final quarter and the entirety of fiscal year 2023, underscores its potential as a small-cap value stock and strength as a short-squeeze candidate. While Q4 was fairly weak, end-of-year financials marked nearly 90% revenue growth and a 141% net income expansion since 2022. Likewise, the company is leveraging its full coffers to reward shareholders and has continued its $10 million buyback program throughout the quarter.

The latter point is particularly noteworthy since, as the most shorted stock, IMPP shares are down 15% over the past month and trading close to penny stock territory. This means IMPP’s management is effectively buying back shares at a discount, which, combined with high short interest, increases the likelihood of a short-squeeze going stratospheric.

iRobot Corp (IRBT)

Source: Grzegorz Czapski / Shutterstock.com

Bears are betting that the canceled iRobot Corp (NASDAQ:IRBT) acquisition tendered by Amazon (NASDAQ:AMZN) will mean the robotic vacuum manufacturer won’t survive much longer. Once a great hope for merger arbitrage traders, IRBT is now a top short-squeeze candidate at 30% short interest. Better yet, IRBT stands out as a moderate value play, as the company’s market cap is just slightly above its book value. Also, though the company struggles to turn a profit, sales are on an uptick that may continue through this week’s earnings report.

This week’s earnings report, which will be posted after market hours today, could be the catalyst that drives IRBT into short-squeeze territory. Expect extensive discussion of iRobot’s ongoing cost-cutting measures and how the company plans to navigate its post-merger reality. If investors and analysts like what they hear, IRBT could execute a rapid turnaround that drives it definitively toward a short squeeze.

Symbotic (SYM)

Source: Phonlamai Photo / Shutterstock.com

Symbotic (NASDAQ:SYM) stock has 40% short interest, which is surprising considering the company is at the forefront of automation and robotics in a niche and profitable sector – warehouse management. The company boasts mega-corp clients like Target (NYSE:TGT) and Walmart (NYSE:WMT) as well, setting Symbotic up as a short-squeeze candidate considering its underlying strength and prospects.

Also, Symbotic is poised to expand its market reach significantly. While the company has primarily served enterprise-level warehousing thus far, it’s now developing a tool to assist small and medium businesses. The “GreenBox” initiative aims to jointly cater to shared warehousing used by multiple small businesses. While it may not seem revolutionary at first glance, one analyst remarks, “I’ve seen a lot of robotics tech, and I’ve never seen anything like it in my life. Compared to what it replaces, it’s like day and night.”

Of course, shorts are targeting SYM for a reason. The reason appears to be twofold: poor (relative) earnings included a $0.08 per share loss after the company’s first profitable quarter. At the same time, SYM is preparing for a common stock offering, which will dilute existing shareholders. While neither is ideal, it doesn’t detract from SYM’s core value proposition. And, when markets realize that their reaction is overblown, SYM could quickly become a top short-squeeze candidate.

On the date of publication, Jeremy Flint held a long position in IRBT. 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.

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