Investors are increasingly fed up with recent market volatility and are looking for high-risk, high-return bets to spice up their portfolios. The recent rally in cryptocurrencies is evidence of this trend, with speculators once again flocking to volatile assets in a manner not seen since 2021. I think this speculative fever could spill over into certain stocks, especially those that are heavily shorted. Despite strong fundamentals.
There are many fast-growing companies whose stock prices remain depressed, and if sentiment turns positive, a huge short squeeze could ensue. While we never recommend betting your life’s savings on penny stocks, even small positions can yield big profits if your short position collapses. Just don’t invest more than you can afford to lose.
If bears are persistently shorting stocks, they may eventually buy back their positions if stocks rebound, or even turn bullish if the company beats expectations every quarter. In the meantime, thanks to the power of the short squeeze, building a modest position in these unfairly battered stocks before they turn around can really pay off.
Of course, it is impossible to predict exactly when the shorts will give in and a squeeze will occur. Penny stocks with high short-term interest rates can fall at any time, so only bet what you can afford to lose. But for those with a higher risk tolerance, here are three penny stocks poised for a massive rally once short sellers throw in the towel.
Charge Point (CHPT)
charge point (New York Stock Exchange:CHPT) is an interesting EV charging company that, at first glance, appears well-positioned to capitalize on the boom in electric vehicle sales. After all, with EV sales outpacing growth in charging infrastructure, many expect heavy government subsidies to help bridge the gap and provide a strong tailwind for the industry. However, if you dig deeper into ChargePoint, the story gets more complicated.
Unsurprisingly, ChargePoint’s biggest competitors are tesla (NASDAQ:TSLA), will struggle to chip away at the giants’ dominant market share in EV charging. Of course, ChargePoint isn’t even profitable yet, and its stock is at its most diluted in recent quarters, further weighing on sentiment. That said, much of the bearishness appears to be priced in, and charge points could rise if investors realize the stock may be oversold at current levels. I’m thinking.
Personally, I see ChargePoint as probably hitting the lower end of strong support. The company also has enough cash to operate its business for one year without significant dilution.Analyst expect ChargePoint expects to significantly reduce its losses next year and return to profitability within about two years. So, in my view, it’s an attractive buy at current levels.
ChargePoint already has more than 70% market share, according to its claims. Despite fierce competition from Tesla, ChargePoint could expand into Europe and other markets. However, investors should remain mindful that further dilution will hurt long-term returns. In any case, the recent excessive pessimism has opened up opportunities for a major recovery.
Earth orbit (LLAP)
terran orbital (New York Stock Exchange:LLAP) is also a stock with a lot of short interest, and its stock price has slumped mainly due to concerns about profitability. However, the losses are much lower than his ChargePoint, and the balance sheet appears to be fairly healthy. Similar to ChargePoint, Terran Orbital is Be expected The company is expected to reach profitability within two years, and profits will rapidly expand thereafter.
In my view, the biggest bullish case for Terran Orbital is Huge backlog of $2.6 billionPromoted by a contract from Livada. The company expects to convert 80% of this backlog into revenue over the next two years, but its market valuation remains at just $154 million. I think the stock could rise significantly once Terran Orbital begins fulfilling and delivering its first orders.
Of course, some still cite profitability risks, but these seem exaggerated compared to other space companies. space x and virgin galactic (New York Stock Exchange:space) is trading at a very high valuation despite continued losses. In contrast, Terran Orbital’s forward price/earnings ratio is less than 3x. Looking two years out, the 0.6x price-to-sales ratio drops to just 0.16x based on estimated two-year earnings.
All things considered, Terran Orbital looks like an attractive short squeeze candidate, although its short interest is around 8%, lower than other potential targets. Still, even without a full-blown squeeze, strong execution could lead to significant gains. The average Wall Street analyst thinks: 511% increase Over next year.
Upstart Holdings (UPST)
upstart (NASDAQ:upst) has been one of the most volatile stocks this year due to its business model. The company provides AI credit risk services to banks. When banks started failing earlier this year and the entire industry was thrown into turmoil, many banks abandoned Upstart and returned to traditional credit risk methods to regain trust. However, with the Federal Reserve currently providing ample liquidity, the possibility of bank failure is low, and investor confidence in the financial sector is beginning to recover.
Analyst expect Upstart’s growth has re-accelerated and is expected to grow significantly in the coming years. Despite the decline in revenue this year, Upstart is expected to return to record revenue levels, growing about 30% annually over the next two years. It is expected to be profitable in two years. Turning to 2026 earnings, the company’s forward price-to-earnings ratio is below his 16x, which is very attractive for a high-growth technology company. Upstart is also sitting on a hefty cash pile of $516 million to cover years of losses.
With short interest remaining at 41%, I think Upstart could rise even further if monetary policy eases. This level indicates that there is significant upside potential if there is some positive trigger. In my opinion, the downturn is due to challenges within the banking industry as a whole rather than company-specific issues. Therefore, UPST stock is likely to rise due to the same catalyst and it is only a matter of time before that happens.
On the date of publication, Omor Ibne Ehsan did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
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