3 Summer Short-Squeeze Candidates With Catalysts for Covering

Key Points

• SoundHound is set up for a short squeeze that the Q2 earnings report may catalyze.
• Etsy's lean into AI will drive revenue and profitability, as well as encourage shorts to cover their positions. 
• Brinker International is accelerating its rebound, revitalizing Chili's business, and analysts are happy about it.

Short squeezes, a market condition where quickly exiting short sellers cause stock prices to rise sharply, can lead to substantial gains for traders and investors. The problem is that a high short interest is often a sign of an underlying problem, and it takes more than a high short interest to spark a squeeze.

The stocks on this list fit the bill.

They have high short interest, which impacts their stock price despite their fundamentally sound operations and robust growth outlooks. The question is whether the upcoming catalysts will be enough to drive out the short sellers and how high the stock prices may go. 

Soundhound AI Can More Than Double in Price

Soundhound AI’s NASDAQ: SOUN short interest spiked in late 2024 when hopes for its hyper-growth phase sent shares to record levels. Now down from the peak set in early 2025, the short interest remains sufficiently high for a robust squeeze at 32% in late June. Recent reports indicate that short interest is rising, increasing the odds of a squeeze if the catalyst appears. That will likely come in an upcoming earnings release. The company is growing at a hyper pace, accelerating client acquisition, and deepening penetration, which is a recipe for outperformance and positive guidance. 

The forecasts for revenue are robust. MarketBeat’s reported consensus for FQ2 is 145% revenue growth, which is likely to be exceeded. The longer-term outlook is also strong, but likely underestimates the business given the expectation for rapid deceleration. The catalyst for a squeeze will include an improvement to the outlook that leads the market to raise its expectations for future revenue growth and profitability. 

The analyst trends align are setting the market up for a stock price rebound. Although the consensus estimate has fallen compared to last year, the 2025 trends include increased coverage, firming sentiment, and a forecast for a 50% upside relative to late-June trading levels. 

Etsy’s Persistent Problem With Short-Selling May Soon End

Etsy’s NASDAQ: ETSY stock price has struggled with persistently high short interest for years. The latest report reveals the interest is running near multi-year highs at 23% and has been rising in Q2. The risk for the short-sellers isn’t in the company’s past performance, which has been tepid, but in the plans to shift strategy and analysts' sentiment. The strategy shift heavily emphasizes AI and automation, which is expected to enhance user experience, retention, sales volume, and margins for both sellers and the business. 

Regarding the analysts' trends, the data reflects a downtrend, but it is the most recent activity that is noteworthy. Two price target increases affirm the company’s decision to leverage AI, a move that has significantly improved operations at other consumer-centric companies, including Meta Platforms NASDAQ: META. 

Regardless, the group rates the stock as a Moderate Buy and is now putting upward pressure on the price action, which is likely to increase following the FQ2 earnings report. The bar has been set low, with analysts expecting a slight revenue contraction compared to the prior quarter and year. 

Brinker International, One Hot Bowl of Chili

Brinker International’s NYSE: EAT short interest was high at nearly 15% at the end of May despite signs of accelerating momentum with its turnaround efforts. The efforts focus on revitalizing the core Chili’s operations, and they are showing results. The company’s growth accelerated to nearly 30% in fiscal Q1, and the forecast for Q2 and the year is equally strong. 

The analysts' trends are also bullish. The June activity consists of two price target increases: one from JPMorgan Chase & Company and the other from Stifel Nicolaus, both to levels above the broad consensus. They average just over $200, a fresh all-time high when reached. Stifel, notably, set a new high-end target for the market with its $215 target and may increase it again later this year. A move to $215 is worth 25%. 

Analysts forecast a solid quarter in Q2, setting the company up for outperformance, with the consensus slightly lower than the Q1 result. The odds are high that this company will continue its trend of sequential growth for at least another quarter, leading analysts to maintain their positive outlook and add upward pressure to the market.