In this article, we discuss 5 best short squeeze stocks to buy now. If you want to see more stocks like these, check out 15 Best Short Squeeze Stocks to Buy Now.
5. Avaya Holdings Corp. (NYSE:AVYA)
Number of Hedge Fund Holders: 27
Short Interest as of September 14: 33.13%
Avaya Holdings Corp. (NYSE:AVYA) is a North Carolina-based company that provides digital communications products and services for businesses worldwide. On September 6, Avaya Holdings Corp. (NYSE:AVYA) announced a number of cost-reduction steps, including layoffs. A reduction in the workforce will result in $250 million in annual cost cutting. Redditors are piling into Avaya Holdings Corp. (NYSE:AVYA) as short interest increases, making it one of the best short squeeze stocks to buy now.
On August 10, Barclays analyst Ryan MacWilliams lowered the price target on Avaya Holdings Corp. (NYSE:AVYA) to 50c from $2 and reaffirmed an Underweight rating on the shares after the preliminary FQ3 results. The analyst believes lower subscription bookings and capex license revenues could “compound investor worries” around Avaya Holdings Corp. (NYSE:AVYA)’s business momentum.
Among the hedge funds tracked by Insider Monkey, Alta Fundamental Advisers is a notable position holder in Avaya Holdings Corp. (NYSE:AVYA) as of June 2022, with 2.8 million shares worth $6.18 million. Overall, 27 hedge funds were bullish on Avaya Holdings Corp. (NYSE:AVYA) at the end of Q2 2022, compared to 24 funds in the last quarter.
Here is what Voss Capital has to say about Avaya Holdings Corp. (NYSE:AVYA) in its Q4 2021 investor letter:
“Avaya is an American multinational technology company headquartered in Durham, North Carolina, that specializes in cloud communications and work stream collaboration solutions. Avaya is a “legacy” tech player undergoing a material business model transition from perpetual license and maintenance to a cloud and subscription model. The company has amassed a giant enterprise customer base in their Telephony (100 million seats) and Contact Center (6 million seats, ~40% global market share) businesses. Avaya is working to rapidly convert these customers to a subscription model while also moving as many as possible to public and private cloud infrastructures.
Converting a customer to subscription on its own provides an over 20% uplift in recurring revenue but moving them to public and private clouds gives a far more substantial uplift as the customer is able to generate significant savings from the move. i Management has guided to $1 billion in Annual Recurring Revenue from transitioning to subscriptions/cloud by the end of this year and $2 billion by fiscal year 2024 (versus $620 million now). We believe the buy side is skeptical of these numbers given the valuation and recent collapse in the stock. Putting aside the fact that the company has raised their ARR estimates each of the last four quarters, what finally convinced us they are making tangible progress in converting large cloud customers (as opposed to just subscription) was a $400 million, seven-year win with a “major financial institution” in Q4 for Contact Center as a Service (CCaaS).ii We believe this came in at roughly $125/month/seat which, if extrapolated to the rest of their Contact Center base, would give them a $9 billion ARR TAM. Keep in mind that this estimation is just considering their existing customer base and does not even include the 100 million Telephony users. The company only needs to convert a small percentage of its current base to cloud to achieve its stated $2 billion ARR target…” (Click here to see the full text)
