In this piece, we will take a look at the 10 most shorted stocks that are loved by analysts.
Short selling is one of the more controversial ways of making money on the stock market. While typically investors buy and hold stocks with the belief that the price will increase in the future, most short sellers bet against the shares after conducting research that suggests weaknesses within a firm’s business model and fundamentals. Naturally, this leads to detractors of the practice arguing that the very act of revealing a short position can negatively affect the target firm’s share price, while the proponents claim that short selling promotes market efficiency and lets diligent investors capitalize on their research skills.
Additionally, while some of the most famous short sells are of smaller firms, large positions often exist in well known and sizeable companies as well. Data shows that as of April 2024, America’s seven largest stocks with a market capitalization of $13.5 trillion also accounted for 12% of the total short interest in the market. This figure sat at $127 billion, and despite the fact that these big ticket technology stocks have soared in 2024, the short interest also jumped by $18 billion during the year from its value of $109 billion at 2023’s close. In percentage terms, this marked a 17% gain which was noticeably higher than the 5% gain for the tech heavy NASDAQ exchange during the same time period.
Of course, just because the value of short interest has grown doesn’t mean that investors are actually shorting more shares. This is because as the value of the target short rises, so does the short interest due to principles of mark to market accounting which values an asset at its latest market price. Within this $18 billion short interest increase between January to May, the majority, or $11 billion was a mark to market increase while $7.1 billion came through new positions being opened.
For short sellers and those watching the US stock markets, May 2024 was an interesting month. This is because it marked the return of the pandemic era meme stocks. These stocks, such as those that belong to video game retailers or entertainment chains, saw Wall Street and retail investors come head to head over the fate during the pandemic as the latter drove their prices up to inflict losses on the former that had shorted the shares. In May, a fresh note from research firm S3 Partners outlined that positive share price movements of heavily shorted video game retailing stocks ended up dealing a massive $838 million in mark to market losses in a single day to short sellers that were otherwise having a profitable 2024.
For the month, these losses stood at $1.24 billion, and they highlighted the power of the Internet which allows retail investors to team up and battle large institutional players shorting the stocks that they love. However, at the same time, analysts also cautioned that while the recent short squeezes were reminiscent of the mania in 2021, they were unlikely to either last as long or be as forceful due to the tighter monetary policy which makes access to capital difficult and costly.
With these details in mind, let’s take a look at some stocks that have a high short interest but equally high price share price targets, which suggests a difference of opinion between what the markets are doing and what the analysts are thinking.
Stocks
Our Methodology
To make our list of the most shorted stocks that are loved by analysts, we made a list of stocks with average analyst ratings of Strong Buy, a short interest as a percentage of their float that was greater than 20%, and a market capitalization greater than $300 million. The stocks were ranked based on their average analyst share price target upside.
10. Prime Medicine, Inc. (NASDAQ:PRME)
Short Interest Percentage: 22.64%
Average Share Price Target: $14.1
Share Price Upside: 124.52%
Prime Medicine, Inc. (NASDAQ:PRME) is a backend gene editing company that enables partners to develop treatments for diseases such as leukemia. Key to the firm’s ‘story’ is its treatment for chronic granulomatous disease (CGD) called PM359. and the shares jumped by close to 10% in May after Prime Medicine, Inc. (NASDAQ:PRME) announced that PM359 had cleared the FDA’s requirements for an investigational new drug (IND). The stock jumped by an additional 14% after Prime Medicine, Inc. (NASDAQ:PRME) released its earnings report for the first quarter. The release hinted that the first patients could take its gene editing drug in 2024, opening the way for potential commercialization if the results were positive.
However, results from PM359’s clinical trial are expected in 2025, pushing any significant commercialization related catalysts in the future. After the PM359’s FDA IND win, Jefferies set a Buy rating for the shares and a $15 share price target. The firm noted that Prime Medicine, Inc. (NASDAQ:PRME)’s FDA clearance ‘de links’ PM359 from the regulatory risks that face other drugs in its pipeline. It added that Prime Medicine, Inc. (NASDAQ:PRME)’s pipeline could be worth as much as $2.7 billion.
9. 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT)
Short Interest Percentage: 21.99%
Average Share Price Target: $52.3
Share Price Upside: 129.59%
4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) is a small biotechnology company developing treatments for lung diseases, macular degeneration, and other ailments. It’s one of the few stocks on our list that is actually up year to date. This is courtesy of an 84% share price jump in February. This came after 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT)’s gene therapy treatment for eye disease that causes spots in older adults. The treatment is called 4D-150, and 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) had shared that high doses of the drug reduced injection rates in patients. The next set of data for 4D-150 came in June when 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) shared that a dose escalation trial led to stable visual acuity in patients.
BMO Capital’s bullish note in June 2024 focused on another 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) treatment. This treatment is 4D-710, a gene treatment for lung fibrosis. BMO shared that while it’s possible that 4D-710 is a safe and effective treatment, it is not relevant to 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT)’s valuation. The firm kept an Outperform rating on the shares and a $63 share price target.
8. Enovix Corporation (NASDAQ:ENVX)
Short Interest Percentage: 31.29%
Average Share Price Target: $29
Share Price Upside: 132.74%
Enovix Corporation (NASDAQ:ENVX) is an American battery manufacturer headquartered in Fremont, California. A small battery company that raked in just $7.6 million in revenue in 2023, Enovix Corporation (NASDAQ:ENVX)’s fate depends on its ability to break into the highly competitive Asian battery manufacturing market and scale up its operations to meet the volume and quality requirements of the electric vehicle, smartphone, and other industries. Naturally, this also means that a lot of investors are betting against the stock as evidenced by Enovix Corporation (NASDAQ:ENVX)’s short interest percentage. The shares are also reflective of this fact, as they jumped by a whopping 45% in May 2024 after the firm announced that it had signed a deal to supply one of the world’s five largest smartphone companies by volume with its EX-1M batteries. The products will be manufactured at Enovix Corporation (NASDAQ:ENVX)’s Fab2 plant in Malaysia, and the first samples were shipped in mid May.
During the latest earnings call, management was clear on why the battery deal presents a huge opportunity for Enovix Corporation (NASDAQ:ENVX):
The smartphone battery leadership opens a $12 billion opportunity for Enovix. If you look at the top bar on the slide, you can see all the OEMs that shipped around 1.2 billion smartphones, in 2023. The top eight of them represent a, $1 billion units, which is 80% of the volume. Now, of the $12 billion lithium-ion battery TAM in smartphones, $9.5 billion is among this top eight. Collectively, they produced 280 plus models of smartphones, which means an average smartphone unit volume of 3.5 million units per model. So, three or four models of this will take a full line of ours.
Now, six of the top eight of these OEMs are going to receive samples from EX-1M smartphone battery from us. So, that $7.5 billion of smartphone battery TAM is actually represented here. So, we’re in great shape as you can see with the market leaders, something that is a priority for me when I joined the company last year, to focus on the largest part of the battery market.