We recently compiled a list of the 10 Most Shorted Stocks That Are Loved by Analysts. In this article, we are going to take a look at where ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC) stands against the other 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.
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.
A scientist studying a brain penetrant inhibitor as part of precision medicine research.
ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC)
Short Interest Percentage: 25.05%
Average Share Price Target: $19
Share Price Upside: 164.62%
ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC) is a biotechnology company that is developing a host of cancer treatments and focusing on those that target cancers resistant to chemotherapy. Like most other biotechnology stocks, its shares are sensitive to regulatory approvals and the market performance of its treatments. The stock has lost 55% since early March after ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC) released its financial report for the fourth quarter of 2023. The release saw CEO Jacob Chacko share that his firm had several key milestones for its products planned in 2025, which meant that investors saw little potential in the stock for 2024. At the same time, while ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC) is expected to move forward with its cancer treatments in 2025, the firm struggled with inflation in 2023. Its research and development expenses grew by 38% during the period.
However, 2024 isn’t a complete empty calendar for ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC). The firm successfully increased the dosage in a clinical trial of its lung cancer and tumor drug in April 2024. However, the shares didn’t respond favorably. ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC) plans to conduct a dose escalation of another drug later this year, and provide an update for its prostate cancer treatment later during the year as well. The first quarter also saw the firm’s research and development expenses increase by 12% annually to sit at $22 million. Citi trimmed the share price target to $14 from $15 in May 2024 but kept a Buy rating on the stock. The bank’s slight shift came after ORIC Pharmaceuticals, Inc. (NASDAQ:ORIC)’s first quarter report which saw the phase 1b trial for the firm’s ORIC-533 treatment miss its previous target of a dose escalation in the first quarter.
Overall ORIC ranks 7th on our list of the most shorted stocks that are loved by analysts. You can visit 10 Most Shorted Stocks That Are Loved by Analysts to see the other shorted stocks that are on hedge funds’ radar. While we acknowledge the potential of ORIC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ORIC 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.
