The current year has been rewarding as compared to 2022 when growth stocks were decimated. As we inch closer to the new year, it’s time to relook at the portfolio and build a strategy to boost returns. With macroeconomic challenges sustaining, I would remain overweight on blue-chip dividend stocks. At the same time, there needs to be some exposure to risky bets to ensure that portfolio returns comfortably beat inflation and index returns. One strategy is to expose a small part of the portfolio to short-squeeze stocks.
Since the meme stock rally of 2021, stocks with high, short interest as a percentage of free-float has caught investor attention. However, not all stock with a high, short interest skyrocket. This column discusses three potential short-squeeze stocks that are likely to double in 2024.
In my view, these stocks have average to weak fundamentals. However, the downside is overdone and positive business news can be a catalyst for a massive rally. Let’s discuss the reasons to be bullish on these stocks.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) has been among the hot stocks this year with an upside of 172%. The stock has however cooled-off from August highs of $7.50 and looks attractive at current levels of $5.30. Besides the fundamental factors, ACHR stock has a short interest of 26%. It’s among the best short-squeeze candidates to buy for the next year.
Coming to the business developments, it’s been an exciting year for Archer. The company expects to commercialize eVTOL aircraft in 2025. It’s worth noting that Archer already has contracts worth $142 million from the United States Air Force.
Another catalyst is global expansion. Archer and Abu Dhabi Investment Office plan to launch all-electric air taxi across UAE in 2026. Furthermore, the company is also entering India in 2026 through a collaboration with InterGlobe Enterprises. The growth outlook for the next few years is robust and Archer has some big investors backing the company’s plans. With these positives, I expect a massive rally in the coming quarters.
Lucid Group (LCID)
If I had to pick some of the top electric vehicle stocks for the long term, I would not include Lucid Group (NASDAQ:LCID) in the list. However, LCID stock looks deeply oversold after a correction of 40% for year-to-date. With a short interest that’s 25% of the free-float, it’s among the short-squeeze stocks to buy.
Recently, Lucid announced Q3 2023 results and reported revenue of $137.8 million. The company delivered 1,457 vehicles during the quarter. However, Lucid has revised the production outlook for the year on the downside to 8,000 to 8,500 vehicles. Muted growth in production and deliveries coupled with cash burn is a concern.
Amidst the challenges, the positive is that Lucid has a cash buffer of $5.45 billion. This is likely to fund operations into 2025 and this includes the production launch of Gravity SUV towards the end of next year. I don’t see any dilution in the next 12 to 15 months. Given the point that LCID stock is technically oversold, a big short-squeeze rally might be on the cards.
Blink Charging (BLNK)
Blink Charging (NASDAQ:BLNK) stock has plunged by 77% for year-to-date. The reasons include intense industry competition and cash burn that would imply dilution of equity. However, there are positives on the horizon and BLNK stock is deeply oversold. It’s also worth noting that the stock has a short interest of 27%. A big short squeeze rally might be on the cards and I would not be surprised if BLNK stock doubles from current levels of $2.5.
For Q3 2023, Blink Charging reported revenue growth of 152% on a year-on-year basis to $43.4 million. Furthermore, the company has guided for revenue of $128 to $133 million for the year. While revenue growth is stellar, the stock has been weak due to cash burn.
The good news on that front is the guidance of adjusted EBITDA break-even by December 2024. With aggressive expansion of the EV charging network, I believe that EBITDA margin will improve significant in 2024 and beyond. Improvement in EBITDA margin will be supported by upside in recurring services revenue.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
