What is an investor to make of a stock that is well-supported by sell-side analysts but also heavily shorted?
For starters, we know that one side may be very right and the other very wrong. Stocks that meet both criteria are also likely to be quite volatile given the wide disparity of institutional opinions.
If the bullish analysts have it right and the bearish shorts have it wrong, a major short squeeze could unfold. If the opposite is true, there could be significant downward pressure on the stock.
Taking the glass half full perspective, let's examine a few names that if the Street is on point, could be in for some healthy short covering rallies.
Is Li Auto Stock a Buy?
Chinese auto manufacturer Li Auto (NASDAQ:LI) is one of the most shorted stocks on the Nasdaq. Approximately 32% of the float is held short. With the stock bouncing nicely off its May 2020 bottom, the shorts may be starting to perspire.
At roughly $30 per share, Li Auto still has a lot of ground to make up to return to its post-IPO peak of $47.70. Analysts seem to think it can get there—and then some. The last seven opinions posted by the Street have all been 'buys'. A couple weeks ago Goldman Sachs made a bold call. It reiterated its 'buy' rating and boosted its target price to a Street-high $62.
To double from here as Goldman predicts, Li Auto must deliver some strong electric vehicle (EV) sales results in 2021. It got off to a strong start in Q1 delivering 12,579 vehicles, more than four times the amount from the prior-year period. The market was also encouraged by the 320% top line growth and expanded gross margin.
The company's 4,323 May 2021 deliveries confirmed that demand is strong from China's recovering consumers. We may be in for a strong second-quarter report as well which could send shorts running for cover and analysts driving their target prices higher.
Is it a Good Time to Buy Riot Blockchain?
Riot Blockchain (NASDAQ:RIOT) is not only one of the most popular stocks on Robinhood and other social media driven platforms, but analysts like it too. All three firms that cover the stock have 'buy' ratings and the target prices are remarkably consistent. This week Compass Point started coverage of Riot Blockchain granting a third 'yes' which on 'America's Got Talent' would be good enough to advance.
However, not everyone is optimistic about the Bitcoin miner's growth prospects. Short sellers are in control of around 29% of the float. Given the recent downturn in the cryptocurrency market, a Bitcoin rally would certainly help propel Riot Blockchain back above $40 where the Street thinks it is headed.
Still, that would only get the stock halfway to its February peak of $80. Absent a major short squeeze rally, it'll take time for Riot Blockchain to reassure the market that its business model is sustainable and its market positioning strong.
Last month the company completed its acquisition of Whinstone US, its biggest coup to date. The addition of Whinstone undoubtedly strengths Riot's Bitcoin mining platform and puts it in a better position to achieve scale. In May 2021, Riot produced 227 Bitcoin which was more than three-times the production from May 2020.
With roughly 2,000 Bitcoin now in its stable, if the company can capitalize on its newfound scale, we could have a short squeeze riot on our hands.
What is 1-800-FLOWERS Stock's Short Interest?
It would seem to take a pretty cold heart to bet against a cheery company like 1-800-FLOWERS (NASDAQ:FLWS) but it's been done, and then done again. One-fourth of the stock's roughly 25 million share float is in the hands of the shorts.
Sell-side analysts on the other hand, are in full bullish bloom. All three firms call the flower and gift basket delivery specialist a 'buy'. At the end of April 2021, D.A. Davidson upgraded to a 'buy' with a $57 target following the company's breakout fiscal Q3 report.
For the three months ended March 28, 2001, 1-800-FLOWERS posted a 70% jump in sales and swung to a net profit of $1.4 million. Management also offered some flowery guidance of 10% to 15% sales growth for the current quarter and 40% for the full year. In response, the stock gapped about $5 higher and hasn't looked back since.
When investors think about the explosive growth ahead in e-commerce, they typically think of the Amazon.coms and Etsy's of the world. Yet 1-800-FLOWERS.com should benefit just as well from the increasing consumer appetite for online shopping.
Today, 1-800-FLOWERS is a powerful conglomerate of all sorts of food and flower arrangements. Harry& David, The Popcorn Factory, Shari's Berries, and Stock Yards meats are just a sampler platter of its brands. In addition to the core flower and gift basket business, the company has a growing Personalization Mall ("pMall") business that sells a range of customizable keepsakes.
For the sake of the analyst support and short seller disdain, 1-800-FLOWERS should be kept on the watch list.
Before you consider 1-800-FLOWERS.COM, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and 1-800-FLOWERS.COM wasn't on the list.
While 1-800-FLOWERS.COM currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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