We recently shared a list of 10 Best Short Squeeze Stocks To Buy According to Analysts. In this article, we will see how The Lovesac Company (NASDAQ:LOVE) compares to the other top short squeeze stocks that have received a Buy rating from analysts.
Stock market trading has an ever-changing environment. Short squeeze is among the few phenomena capable of capturing and holding the attention of such markets. The phenomenon involves a heavily shorted stock suddenly experiencing a rapid price increase, urging short sellers to buy shares to cover their positions, thereby accelerating the upward momentum. Astute investors make significant gains out of the scenario upon identifying these opportunities in their early stages. After Donald Trump’s ascension to the U.S. Presidency, recent market activities have demonstrated the significance of short squeezes.
READ ALSO: 10 Best Short-Term Stocks To Buy Right Now
Tariff rates were the first aspect to take a hit and directly impact the stock market after President Trump’s arrival in the White House. The U.S. announced a 25% tariff on imports from Mexico and Canada, effective March 4, 2025. The announcement came alongside increased tariffs on Chinese goods from 10% to 20%. These new tariff rates sent ripples through the financial markets, affecting the stocks in the U.S. and beyond, as countries like Canada started countering the move by threatening to increase tariffs on U.S. products as well.
By March 6, 2025, the U.S. President signed orders and brought many goods to the list of exemptions from his new tariffs on Canada and Mexico. For instance, CNN reported a temporary halt on the new 25% tariff rates on imports for carmakers from Canada and Mexico. However, the decision did not alleviate the substantial adverse effect the U.S. stock market felt. CNBC noted that individual investors pulled $1.2 billion from the U.S. equity market, the highest ever in the decade.
However, tariffs do not only affect the volatility of the U.S. market. Various incidents contribute to the shifts in the broader market, setting the stage for potential short squeezes. For instance, the advent of new AI models from China initially caused a wave in the technological industry, leading many of the giant tech companies to witness a never-before-seen decline in their return. These foreign AI models were comparatively more flexible yet cheaper than their U.S. counterparts, thus resulting in many investors pulling their investment from tech companies.
The hedge funds have been reducing their holdings in Chinese equities for the fourth consecutive week; however, the enthusiasm for Chinese tech stocks, initially sparked by the new AI startups, began to wane. The trend reflects a cautious approach, possibly opening avenues for short-squeeze opportunities in other sectors.
Furthermore, Asia-focused hedge funds have performed better than their U.S. counterparts during recent market sell-offs. Owing to the recent market volatility in the U.S., global investors sought refuge in the Chinese stocks, eventually contributing to this outperformance. These events increase the potential for short-squeeze scenarios in different markets, including the U.S.
These developments have led to an upward trend in the attention of analysts on stocks with high short interest and substantial upside potential. Hence, investors will find it beneficial to their investment portfolio to delve into the top 10 short-squeeze stocks to consider, as recommended by leading analysts.
Our Methodology
We compiled our list using a few key financial metrics. Primarily, we took stocks with Short Float of over 15%. This is a critical factor for potential short squeezes, representing significant short interest. We also filtered our list based on Relative volume. Our list comprises stocks with a Relative Volume of over 1.5, indicating higher-than-usual trading activity.
Additionally, we included only those with Positive EPS to signify profitability. We refined our selection further by considering only the stocks with a Buy or better recommendation from analysts, as this ensured they had favorable market sentiment. Lastly, we included only stocks with an average trading volume of at least 100K, providing sufficient liquidity. The final list was ranked based on the analysts’ upside potential, which was used to deliver the highest expected price appreciation in our article. We also found it helpful to mention the number of hedge funds from Insider Monkey’s Q4 2024 database, following each stock in our list, to allow the investors to understand their level of institutional interest.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A customer reclining in a luxurious Sactionals chair, surrounded by tasteful and stylish furnishings.
The Lovesac Company (NASDAQ:LOVE)
Short % of Float: 21.91%
Number of Hedge Fund Holders: 33
Analysts Upside Potential: 125.8%
The Lovesac Company (NASDAQ:LOVE), headquartered in Stamford, Connecticut, designs and sells modular furniture, including signature Sectionals with customizable, reconfigurable seating solutions. The company differentiates itself from traditional furniture retailers by concentrating on sustainable materials and washable, durable covers. In doing so, they appeal to the modern eco-conscious consumers. With showrooms across 41 states, the company competes with market leaders like La-Z-Boy and IKEA by emphasizing innovation and flexibility in home furnishings.
The Lovesac Company (NASDAQ:LOVE) has a notable short interest of 21.91%, turning it into a potential short-squeeze target for investors. The rise comes after the company announced its outlook guidance for 2025. The company anticipates net sales in the range of $660 million to $680 million and an adjusted EBITDA of $37.5 million to $48.5 million. The company aims to cover these projections by entering the loveseat, sofa, and chair category with the launch of EverCouch in 2025 and expanding beyond its Sactionals format, thereby experiencing a positive reception in the market.
Institutional investors are heavily involved in The Lovesac Company (NASDAQ:LOVE), with 33 hedge funds, followed by Insider Monkey, holding stakes at the end of Q4. Analysts remain bullish, assigning a Buy rating and setting a price target of $35, representing an upside of 125.81% from the current price of $15.50. The strong institutional support and high short interest suggest that any positive developments could lead to a wave of short covering.
Overall, LOVE ranks 5th on our list of 10 best short squeeze stocks to buy, according to analysts. While we acknowledge the potential for LOVE as an investment, our conviction lies in the belief that some AI stocks hold more significant promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LOVE but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
