Short-squeeze moves can be ferocious and are perfect for investors seeking quick trading gains. With the possibility of a rate cut-induced rally, I am bullish on some short-squeeze stocks for the next few quarters.
I am a long-term investor. However, I don’t shy away from taking trading positions in 5% to 10% of my fund allocation towards equities. When there are some clear short-squeeze opportunities, it makes sense to make 50% or 100% gains and invest the profits in long term bets. Of course, the short-squeeze rally can be bigger.
This column includes three short-squeeze stocks for the next 6 to 12 months. These stocks represent companies with average fundamentals and with possible business catalysts. The rally can translate into quick 2x to 3x returns if these triggers play out. Let’s talk about the reasons for being bullish.
EVgo (EVGO)
EVgo (NASDAQ:EVGO) stock has plunged by almost 50% in the last 12 months. The short interest in the stock continues to remain at 35%. I believe EVGO stock is oversold and poised for a big short-squeeze rally. Besides the speculative factor, there are positives regarding the EV charging company’s fundamentals.
For Q1 2024, EVgo reported stellar revenue growth of 118% on a year-on-year basis to $55.2 million. Healthy growth will likely sustain with 3,780 stalls in operation or under construction. At the same time, the company’s adjusted EBITDA loss narrowed to $7.2 million for the quarter. EVgo has already guided the adjustment of EBITDA break-even next year.
With $176 million in cash and equivalents, there is ample flexibility to pursue aggressive expansion. This will support the case for operating leverage-driven margin improvement. Potential expansion outside the U.S. will likely support growth in the long term.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) is another interesting bet among stocks with high short interest. Cannabis stocks are likely to surge higher in the next few quarters.
The reason includes the possible reclassification of cannabis to a Schedule III drug. Further, with Presidential elections around the corner, there will be renewed debates on federal-level legalization of cannabis. That’s likely to translate into speculative moves in cannabis stocks.
It’s worth noting that Aurora Cannabis has a strong presence in Germany. The legalization of recreational cannabis is likely to have a positive impact on growth. In March, the company also achieved Australia’s TGA GMP Certification. Aurora has been expanding in emerging markets like Australia and New Zealand.
From a financial perspective, Aurora ended Q3 2024 with a cash buffer of $200 million. Credit metrics will likely improve with positive adjusted EBITDA and commitment to achieve positive free cash flows in the financial year 2024. Therefore, with industry tailwinds and company specific positives, a big rally seems to be on the cards.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) stock has plummeted from the highs of 2021 when the meme stock euphoria peaked. However, I would not classify PLUG stock as a purely speculative bet. The hydrogen and fuel cell company has ambitious growth plans through 2030. The challenge relates to execution and financing.
However, the concerns have been alleviated to some extent in the recent past. The biggest positive is that the company has received a conditional commitment for an up to $1.66 billion loan guarantee from the Department of Energy. This financing will be used to construct and own up to six green hydrogen production facilities.
Plug Power has also been boosting its order book for the electrolyzer basic engineering and design package offering (BEDP). The order book for this segment is at 4.5 gigawatts for Projects in the U.S. and Europe. Last month, the hydrogen company signed a 3GW BEDP project in Australia. With an expanding global presence, the growth outlook is robust.
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.
