These 3 Short-Squeeze Candidates Have Catalysts, But Their Risks Are Just as Large

Key Points

• Ondas Holdings, Wolfspeed, and Xponential Fitness all show heavy short interest alongside potential catalysts that could trigger a short squeeze.
• Each company faces significant bearish pressures, including operating losses, declining revenue trends, or weakening balance sheets that justify investor skepticism.
• Despite the risks, analysts note possible turnaround catalysts, such as government contracts, data center growth, or corporate governance improvements, that could challenge short sellers.

A strong short squeeze candidate can excite investors across the market, both for its potential to reward those who have taken long positions and for the possibility that it will gain additional momentum as bearish investors are forced to buy shares to close their positions. The issue for most investors is that a short squeeze is notoriously difficult to predict, and even if the scenario does come to pass, it tends to be over quickly, leaving limited time to capitalize.

When searching for a short squeeze candidate, it can be helpful to look for companies that have noteworthy bearish signals and a potential catalyst that could set the process in motion. The companies below fit this description to varying degrees, but it will be up to investors to assess whether they are more likely to face a squeeze or a legitimate share price plunge.

Ondas Has a Desirable Product, But Uncertainties and High Expenses Prompt Bearishness

Drone and wireless networking company Ondas Holdings Inc. NASDAQ: ONDS might appear to be a textbook short squeeze candidate. It has consistent and elevated short interest—short interest represents more than 42% of the public float and has climbed by 4.7% in the last month—owing to the firm's lack of commercial scale. At the same time, a relatively small float means that positive news might have a bigger impact on share prices than it might otherwise.

A bullish case for this company may hinge on its Ondas Autonomous Systems, the company's primary business, which includes its drone platforms used for defense, public safety, and infrastructure. As defense budgets around the world increase, and as both warfare and defensive operations focus increasingly on autonomous systems, Ondas could benefit over the long term. Revenue has already been skyrocketing, climbing 13-fold year over year (YOY) for Q2 2026.

On the other hand, Ondas is an early-stage business that still faces operating losses. Last quarter, losses came in 10 cents wider than anticipated as operating expenses surged. The uncertainties here may prompt investors to remain bearish. Still, if the company were to announce a major government contract or even a move toward profitability, it could force those investors to reevaluate.

The Market Looks Down on Wolfspeed, But There's a Contrarian Case

Wolfspeed Inc. NYSE: WOLF has developed a reputation as a black sheep in the semiconductor industry, owing to slowing electric vehicle (EV) demand for silicon carbide, a number of manufacturing challenges, and an unstable balance sheet.

These issues combine to lead Wall Street analysts to caution that shares are a Hold (and potentially overvalued, with nearly 30% in downside potential) and investors to sell short nearly 50% of the public float. Revenue is trending in the wrong direction, even as the company's losses per share were narrower than anticipated in a recent quarterly report.

Still, there may be reasons for some contrarian investors to go long on WOLF shares. For one, the company's data center business is thriving, with revenue in that segment more than doubling YOY. The company also reached the midpoint of the year with $1.1 billion in cash and short-term investments, helping to trim its annual interest expenses. It also has some exciting commercial applications in the works that could help to reinvigorate growth.

With the market so pessimistic about WOLF, even a modest win could kick-start an upward price motion that might put short sellers in a difficult position.

Financial and Operational Struggles Make Xponential a Top Short Candidate

Xponential Fitness Inc. NYSE: XPOF is a beleaguered fitness brand franchisor that has experienced a 42% year to date (YTD) share price drop. With a short interest representing about 27.5% of the public float—nearly 12% up in the last month—the market is generally betting against a recovery.

There are operational reasons behind this, including a lack of success with the franchise model and tepid growth. Still, there may be signs that a turnaround could be possible. Corporate governance is a major project for the company, and it continues to expand its presence, having achieved nearly 3,200 global studios as of the end of last quarter.

As Xponential's cash reserves decline and its long-term debt rises, it becomes an increasingly high-risk venture for investors approaching it as a short squeeze. Still, if that should come to pass, bullish investors may benefit significantly. Analysts suggest caution is warranted, with the large majority calling for a Hold for XPOF stock.