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Finance

3 Stocks with High Short Interest to Buy This Summer

The short squeeze wave, which took the stock market by storm earlier this year, drove sky-rocketing rallies by GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC), among other meme stocks. The retail trading frenzy has been continuing into this summer. According to Morgan Stanley (MS), retail traders account for 10% of the United States’ stock trading volume.

With improving advanced technology and access to zero-commission trading platforms, retail traders are expected to take more control of the market. They are betting on stocks that are heavily discussed on several social media platforms, such as Reddit, because of their high short interest. Benefiting from a short squeeze in these stocks is these investors’ primary goal.

VMware, Inc. (VMW), Continental Resources, Inc. (CLR), and Macy’s, Inc. (M) currently possess high short interest. While this indicates that institutional investors are bearish about them, they could get targeted by retail traders seeking to precipitate a short squeeze. So, we think it could be wise to scoop up these three stocks now.

VMware, Inc. (VMW)

One of the leading companies in the cloud infrastructure space, Palo Alto, Calif.-based VMW provides software in the areas of hybrid and multi-cloud, modern applications, networking, security, and digital workspaces internationally. It provides VMware multi-cloud solutions, including vSphere, vSAN and VxRail, vRealize Cloud Management solutions, and VMware Cloud Foundation. Of the company’s total floating shares, 17.7% have been sold short.

On June 9, VMW and Vapor IO announced that they are building a Multi-Cloud Services Grid that integrates the VMware Telco Cloud Platform with Vapor IO’s Kinetic Grid platform, allowing developers and service operators to hyper-compose grid services on-demand. This is expected to greatly simplify and lower the costs of deploying distributed 5G systems.

VMW’s revenue increased 9% year-over-year to $2.99 billion for its fiscal first quarter, ended April 30, 2021. Its non-GAAP operating income grew 13% year-over-year to $923 million. Its non-GAAP net income came in at $744 million, which represents a 16.2% year-over-year increase. The company’s non-GAAP EPS was $1.76, up 15.8% year-over-year.

The company’s EPS is expected to increase 9.8% year-over-year to $7.63 in its fiscal year 2023. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 9% year-over-year to $12.83 billion in its fiscal year 2022. The stock has rallied 11% over the past six months to close yesterday’s trading session at $150.95.

VMW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has an A grade for Quality and Value. Within the Software – Business industry, VMW is ranked #7 of 59 stocks. To see the additional POWR Ratings for VMW (Stability, Growth, Sentiment, and Momentum), click here.

Click here to check out our Cloud Computing Industry Report for 2021

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Continental Resources, Inc. (CLR)

CLR in Oklahoma City, Okla., explores for, develops, and produces crude oil and natural gas in the United States. It sells its crude oil and natural gas production to energy marketing, crude oil refining, and natural gas gathering and processing companies. The company’s proved reserves are 1,104 million barrels of crude oil equivalent, with proved developed reserves of 627 MMBoe. Of its total floating shares,  14.2%  have been sold short.

The company doubled its quarterly dividend to $0.11 per share, which was paid on May 24, 2021. This reflects its commitment to delivering strong shareholder capital returns. CLR’s CEO, Bill Berry, said, “Continental’s outstanding first-quarter results and accelerated shareholder returns, which includes our reinstated dividend and exceptional progress on debt reduction, underscores Continental’s commitment to delivering strong cash flow generation, consistent asset performance, and operational excellence.”

CLR’s revenue climbed 38% year-over-year to $1.21 billion for its fiscal first quarter, ended March 31, 2021. Its operating income came in at $405.70 million, compared to a $193.59 million operating loss in the prior-year period. Its net income came in at $260.27 million, compared to a $186.78 million net loss in the year-ago period. Also, the company’s EPS came in at $0.72 versus  a $0.51 loss per share in the prior-year period.

For the quarter ending September 30, 2021, analysts expect CLR’s EPS to increase 518.8% year-over-year to $0.67. The company’s annual revenue is expected to increase 78.5% year-over-year to $4.62 billion in its fiscal year 2021. The stock has surged 171.5% over the past nine months to close yesterday’s trading session at $35.41.

CLR’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It has an A grade for Momentum, and a B grade for Growth, Sentiment, and Quality.

Click here to see the additional POWR Ratings for CLR (Stability and Value). CLR is ranked #18 of 95 stocks in the Energy – Oil & Gas industry.

Macy’s, Inc. (M)

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M is an omnichannel retail organization that operates roughly 727 stores across 43 states and operates through its websites and mobile applications under the Macy’s, Bloomingdale’s, and Bluemercury brands. It sells a range of merchandise, cosmetics, home furnishings, and other consumer goods. Of its total floating shares, 13.3% have been sold short. M is based in Cincinnati, Ohio.

The company has announced that its all-new store concept “Bloomie’s” will open on August 26, 2021, in Fairfax, Virginia. Bloomie’s brings the best of Bloomingdale’s to a smaller, highly curated, ever-evolving store concept filled with top brands, a new tech-enabled stylist service model, and a vibrant restaurant experience. This could lead to an increase in  sales for M.

M’ sales increased 56% year-over-year to $4.71 billion for the fiscal first quarter ended May 1, 2021. Its operating income came in at $215 million, compared to a $4.12 billion  operating loss in the prior-year period. Its net income for the quarter came in at $103 million, compared to a $3.58 billion net loss in the year-ago period. Also, the company’s EPS was  $0.32 compared to an $11.53 loss per share in the prior-year period.

Analysts expect M’s EPS and revenue to increase 197.3% and 27.1%, respectively, year-over-year to $2.15 and $22.04 million in its fiscal year 2022. It surpassed  consensus EPS estimates in each of the trailing four quarters. The stock has soared 180.1% over the past nine months to close yesterday’s trading session at $17.56.

It’s no surprise that M has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Value, and a B grade for Growth and Quality.

Click here to see M’s ratings for Momentum, Stability, and Sentiment also. M is ranked #35 of 66 stocks in the A-rated Fashion & Luxury industry.

Click here to checkout our Retail Industry Report for 2021

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VMW shares were trading at $150.97 per share on Friday afternoon, up $0.02 (+0.01%). Year-to-date, VMW has gained 7.64%, versus a 16.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…

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