2 Short-Squeeze Candidates Waiting for the Right Catalyst

Key Points

• Hertz Global and SoundHound AI are both heavily shorted stocks with elevated days to cover, creating conditions that could support a short squeeze.
• Hertz is working to improve fleet economics and return to profitability, while SoundHound AI is focused on growth, AI expansion and integrating LivePerson.
• Both stocks still need a meaningful catalyst to force short sellers to cover, making execution and upcoming results especially important.

Stocks with high short interest are a dime a dozen; the question is whether shorts can cover quickly, which is indicated by days to cover. Days to cover measures how many days at average volume it would take short sellers to close out 100% of their positions; the higher it is, the better (if you are looking for a squeeze), and above five is generally good. More than five days to cover suggests sufficient difficulty for shorts to cover, provided an explosive catalyst emerges.

Hertz Global: Engine Is Running, Just Waiting for the Signal

Hertz Global NASDAQ: HTZ is among the most heavily shorted stocks on the market and is exhibiting classic signs of a short squeeze. Depending on the platform, the short interest ranges from approximately 30% at the low end to as much as 75%, with a high short ratio in the mix.

The high short ratio is a key factor, as it indicates it would take more than a week of buying at normal levels to close out the short positions. Some platforms report as many as 11.5 days to cover. With this in play, the market needs only a catalyst to invigorate retail trading and drive all available shares to zero, sending shorts scrambling to cover and the share price rocketing higher.

Catalysts include the company’s growth and pathway to profitability. Recent results reflect unexpected strengths, including core fleet efficiency metrics like a smaller fleet size, 9% revenue per unit growth, and 8% revenue per day growth. Looking ahead, the company is expected to reach profitability over the coming year and may surprise investors with good news along the way.

Hertz's 2026 strategy rests on four pillars: fleet age, stabilizing depreciation, expanding service areas, and extending vehicle lifecycles. Fleet age is central; by reducing the overall fleet age to about a two- to three-year average, the company aims to lower maintenance and repair costs. Short-sellers focus on the high debt.

Meanwhile, the fleet mix is also changing, reducing the number of EVs to better align with the depreciation profile. For growth, the strategy focuses on markets outside of airports, the traditional home ground. They provide more predictable revenue with less holiday-related impact. Likewise, targeting the ride-share/delivery market helps extend vehicle lifecycles and monetization by giving drivers easy access to vehicles.

Analyst trends are a headwind. The eight MarketBeat tracks rate the stock as a Reduce, and price targets are falling. While consensus forecasts about 80% upside, the trend points to the low end, well below late-September trading levels. Institutions, however, own nearly 100% of the shares and have been accumulating them at such low levels, raising the stakes for short-sellers.

SoundHound AI: An Execution Story in Play

SoundHound NASDAQ: SOUN is another heavily shorted stock, with a short interest above 40% as of mid-September. The risks are cash burn and execution. Skeptics wonder whether the company can successfully monetize its backlog and transition to profitability while integrating massive acquisitions such as LivePerson. Again, days to cover matters, with MarketBeat data indicating seven days to cover, more than a week’s trading volume, suggesting this market is a tinderbox waiting to be lit. Catalysts include quarterly outperformance, likely given the trends and rapid LivePerson integration.

LivePerson is a key element, validating SoundHound’s ability to scale rapidly and capitalize on cross-selling opportunities if done successfully. Other catalysts include product innovation, including agentic AI and in-car voice assistance. The Oasys Edge platform aims to open new addressable markets by enabling localized AI deployment without an internet connection, while deals with Stellantis NYSE: STLA and NVIDIA NASDAQ: NVDA are strengthening its position as a leader in agentic automotive original equipment manufacturer (OEM) software.

The market gets SoundHound wrong by treating it as a niche, automotive-focused company with dubious leverage. It is transitioning into an enterprise-quality vendor, providing consumer-facing interfaces across the stack, and is starting to show leverage at scale. The OASYS and LivePerson acquisitions are central to the strategy, creating an omnichannel provider with voice, web, mobile, and SMS capabilities, already serving 25% of the Fortune 100. The question is whether the company can integrate the systems into a universal product and expand its user base, which is the optimal scenario.

Conversely, seven analysts rate SoundHound as a consensus of Moderate Buy with more than 50% Buy-side bias. They see its price floor near $6, aligning with the critical support target, and more than 100% upside at the midpoint target. Good news can trigger a move to consensus; the key question is whether it's enough to lift sentiment and spur analysts to raise price targets.