Investors looking at stocks with the highest short interest in April tend to target two possible plays: ride the short-selling wave in hopes the stock is further suppressed or hang onto the hope of a short squeeze sending shares soaring. While short squeezes happen, they’re uncommon and rarely gather the momentum to hit absurd highs that many expect. Short squeezes like we saw with GameStop (NYSE:GME) are an exception rather than the rule and tend to be one of those events that happen once or twice during an investor’s market lifecycle.
Don’t hang your hat on the hopes of a short squeeze for these stocks with the highest short interest in April. Each has specific factors driving short interest; in each case, those variables are well-established and point to further trouble.
SunPower (SPWR)
Clocking in at a whopping 83% short interest, SunPower (NASDAQ:SPWR) is the most-shorted stock as we enter April. The residential rooftop solar sector is notoriously difficult to penetrate, with tons of high-quality companies competing for an increasingly shrinking pool of interested homeowners. At the same time, high upfront and financing costs are cutting into sales across the industry. Both factors are pushing SunPower’s stock down and, staking claim to less than 1.5% of the total existing market, SunPower has a long way to catch up to top competitors like Tesla (NASDAQ:TSLA) and even Canadian Solar (NASDAQ:CSIQ).
A major sticking point for SunPower is its limited unique or proprietary offerings. In a sector as flooded with competitors as residential rooftop solar, companies live and die by their differentiated offerings. While SunPower’s SunVault energy storage system is proprietary, it competes with a range of companies with unique hardware fully integrated into the value chain, like Enphase Energy’s (NASDAQ:ENPH) microinverters. While SunPower may not be a “bad” stock, its lack of profitability and limited competitive advantage set it up as the stock with the highest short interest in April.
B. Riley Financial (RILY)
Snagging another top spot on the list of stocks with the highest short interest in April is struggling financial services firm B. Riley Financial (NASDAQ:RILY), with 76% short interest. The aggressive short interest comes from management’s failure to file audited financial results last month. Financial chicanery may be part and parcel of many company reports, but failing to file is a big deal that could cover major financial misdeeds or mismanagement — but only time will tell. B. Riley got another extension to file, with a new deadline of April 19th, which pushed shares about 26% higher but only served to reinvigorate short interest as short sellers anticipate either further delays (or worse).
Beyond this already potentially devastating development, B. Riley’s financial stats justify its high short interest. The company’s debt-to-equity ratio sits at a whopping 5.64. Though financial service firms tend to carry substantial debt, as leveraged investment positions count toward the total, the wider industry’s debt-to-equity ratio is nearly one-fifth of B. Rile. It sits at an average of just 1.42. Worse yet, the company’s net margin is -5.38%, compared to the sector’s 12.24%, and nearly every other measure of financial health is equally concerning.
Beyond Meat (BYND)
Beyond Meat (NASDAQ:BYND) is a perennially shorted stock with high short interest; April’s short interest count is 36%. The many reasons for Beyond’s high short interest are clear — even during panicked shopping sprees, consumers studiously avoided buying Beyond Meat products, reinforcing the fake meat’s total lack of consumer popularity.
To that end, the company’s fourth-quarter 2023 filings say it all. Sales slumped for the quarter and year, at 7% and 18% dips, respectively. Worse yet, profits dropped even as 2022’s shaky economy, as its quarterly net loss more than doubled in 2023’s fourth quarter to hit $155 million. There’s little upside for this struggling stock, justifying its high short interest and ultimately putting the company at risk of dissolution. Though some see potential in Beyond Meat as a short-squeeze play, the verdict is in on the fake meat stock — and it’s rotten.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
