Skip to main content

2 Meme Stocks With Short Squeeze Potential In October

Wall Street Memes lists two meme stocks that might be on the edge of a short squeeze. Will ATER and BGFV head to the moon in October?

The “Meme frenzy” took a pause in September. However, retail investors continue to monitor a few stocks on the main discussion boards across the web.

Driven by popularity, momentum and high short interest, Wall Street Memes lists two meme stocks that have short squeeze potential in October.

#1 - Aterian, Inc $ATER

Figure 1: Aterian's IPO.

Figure 1: Aterian's IPO.

Tech company Aterian operates a software platform that applies data analytics and machine learning to consumer products. Aterian stock (ATER) has become a meme target, after its short interest reached 23% of the float in September. According to Ortex, this number could be as high as 44% today.

Figure 2: Reported short interest history for $ATER.

Figure 2: Reported short interest history for $ATER.

The most probable reason behind the elevated short interest is a bearish report from Culper Research that (1) labeled Aterian an “overhyped artificial intelligence” story and (2) suggested that the company has done “garbage” acquisitions. Aterian defended itself from the attack by claiming that the report was an attempt to manipulate share price for Culper’s own benefit.

ATER stock became popular on the internet early in September. In a matter of days, shares surged more than 120%, probably due to a short squeeze. At such high short interest levels alongside the increase in popularity among retail investors, Aterian stock could go through another short squeeze in the foreseeable future.

Figure 3: $ATER mentions on social media, WSB and various channels.

Figure 3: $ATER mentions on social media, WSB and various channels.

Lastly, Wall Street seems to believe that ATER is a good long-term investment. Analysts hold a strong buy consensus rating and see 25% upside potential over the next twelve months, at an average price target of $12.50.

Alliance Global and D.A. Davidson recently increased their price targets on ATER to $14. Supporting bullishness is the renegotiation of Aterian’s debt terms, in addition to an improvement in logistics expenses.

#2 - Big Five Sporting Goods $BGFV

Figure 1: Big 5 Sporting Goods store.

Figure 1: Big 5 Sporting Goods store.

This sporting-goods retailer is another target of the bears. Big 5 Sporting Goods currently has 8 million shares shorted from its 22 million share float, which represents short interest of almost 39% — data from Yahoo Finance as of September 14. However, Ortex suggests that even higher numbers have been reached recently. See below.

From a business fundamental perspective, it is hard to tell for sure why short interest has been so elevated. The company has been delivering solid results. Revenue has increased 43% from prior year and the company currently has no debt.

Valuations seems to be attractive too. BGFV stock currently trades at a 2021 P/E of only 5 times versus a sector median of 14x. Dividend yield of 2.6% versus sector median 1.4% provides yet another hint that the stock might be undervalued. Lastly, company insiders have been buying the stock, suggesting confidence from within the management team.

BGFV’s popularity, on the other hand, is still subdued. The stock had only a few mentions across the social medias and on discussion boards in the last couple of months. Wall Street Memes wonders whether (or why) this interesting story of solid fundamentals and elevated short interest may have flown under the radar of retail investors.

Twitter speaks

Which meme stocks are you betting to go to the moon in October?

Get more expert analysis on "stonks"

It’s never too early (or late) to start growing your investment portfolio. Join the Real Money community for just $7.50/month and unlock expert advice from our team of 30+ investing pros.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)