Some of the top meme stocks had an epic rally in 2021. The hedge funds were on the receiving end as they were caught in a big short squeeze. Times have changed and I don’t see the investor frenzy of 2021 coming back anytime soon. However, without doubt, there will be meme stocks ready for a short squeeze. For short-term traders, identifying these meme stocks can help in generating big profits at the blink of an eye.
Meme stocks can be defined as “shares of a company that have gained viral popularity due to heightened social sentiment.” The most important point to note is that the rally in meme stocks can have a complete disconnect with fundamentals.
Of course, good news from the company can boost the chances of a bigger short squeeze rally. Let’s talk about three meme stocks ready for a short squeeze based on the short interest as a percentage of float.
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) stock represents a company that has average fundamentals. With short interest that’s 25% of the float, I believe that it’s among the top meme stocks ready for a short squeeze.
It’s important to understand why investors are betting against MARA stock. The company works to enhance the Bitcoin (BTC-USD) network while also mining the cryptocurrency. This means if Bitcoin trends lower, the miner is likely to witness a short correction. Further, the company has been slow in terms of delivering on mining capacity expansion. This can potentially impact earnings estimates.
However, if Bitcoin remains in an upward trend, MARA stock will surge higher. It’s also worth noting that the company continues to aim for hash rate capacity expansion, it hopes to reach 23EH/s by June. If the company can achieve this target, the stock is likely to go ballistic.
If I had to buy a Bitcoin miner from a long term investment perspective, there are better options like Riot Platforms (NASDAQ:RIOT). However, MARA can skyrocket in the coming months if the catalysts play-out.
Lucid Group (LCID)
While Lucid Group (NASDAQ:LCID) was touted as a Tesla (NASDAQ:TSLA) competitor, the stock behavior has been purely speculative. In the last 2.5 years, LCID stock has only surged above $50 in two instances.
In both cases, the slump has been equally sharp and the stock is currently below $8. With short interest at 24% of float, it’s another meme stock ready for a short squeeze. After a sustained downturn, LCID stock looks massively undervalued and business fundamentals are average.
It’s worth noting that Lucid was disappointing last year in terms of production and deliveries. The company has however reaffirmed its guidance to produce 10,000 vehicles this year. Additionally, the company is fully funded into Q2 2024. The launch of their Project Gravity SUV next year is another impending catalyst for the stock. Once a short squeeze rally is underway it has the potential to bring in returns of more than 100%.
ChargePoint Holdings (CHPT)
ChargePoint Holdings (NASDAQ:CHPT) stock has remained weak in the last 12 months. This has not been a deterrent for investors taking short positions in the stock.
There are two reasons for sentiments remaining bearish. First, EV stocks have taken a beating and ChargePoint is focused on EV charging infrastructure. Further, the company is still at an early growth stage and valuations still look stretched.
Having said that, sentiments have been over bearish for an extended period. All it takes is one instance of good news to kick start a massive rally in the short term. When it comes to business fundamentals, ChargePoint is a leader in EV charging in the U.S. and has already expanded into 16 European countries.
The company generates revenue from hardware sales, software subscriptions and services. As the number of charging ports installed swells, recurring revenue will increase. This will translate into higher EBITDA margin.
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.
