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2 Stocks With Short Squeeze Potential In December

Wall Street Memes presents two meme stocks that could be on the edge of a short squeeze. Will GOEV and CRTX head to the moon in December?

Retail investors on the main online discussion boards continue to scan the market for momentum stocks to profit from. Some of the most likely candidates are bearish trades that eventually get overcrowded and may fall victim to short squeezes.

Driven by popularity, momentum and elevated short interest, Wall Street Memes presents two meme stocks that have “mooning” potential in December.

Canoo - $GOEV

Torrance, California-based electric car company Canoo  (GOEV) - Get Canoo Inc. Class A Report went public via a SPAC (special purpose acquisition company) merger. Since going public, skepticism has mounted on whether the investment opportunity has been overhyped. The downfall of SPACs at large, earlier in 2021, has not helped either. GOEV has been up 43% since November but is still down 4% year-to-date.

Figure 1: Canoo's electric pickup truck.

Figure 1: Canoo's electric pickup truck.

Canoo was considered a “meme stock” as short interest reached 27% of the float. One possible reason for elevated short interest is sky-high volatility and uncertainty surrounding the electric vehicle space. Compared to traditional vehicle manufacturers, regulatory and policy matters are much more important (and unpredictable) factors to consider before investing.

Other electric vehicles manufacturers, including Workhorse, Fisker and Arcimoto, also suffer from elevated short interest of around 30%. This could either mean that EV stocks are in for a rough ride ahead, or that EV companies and their shares are great targets for short squeezes.

Also, the company’s more attractive valuation pleases investors. Canoo’s $2.8 billion market cap is just above one-third that of key peer Fisker  (FSR) - Get Fisker Inc Class A Report, at $6.5 billion. Canoo has 9,500 pre-orders for 2022 and 2023 valued at $313 million, assuming the cheapest model price. Fisker, on the other hand, has 17,000 pre-orders valued at $637 million, also assuming the cheapest model price.

At first glance, and understanding that a more comprehensive valuation analysis would be needed here, these numbers help to support the thesis that Canoo may be cheaper compared to some of the other high-growth players in the EV space.

Cortexyme Inc - $CRTX

Micro-cap biopharmaceutical company Cortexyme Inc  (CRTX) - Get Cortexyme, Inc. Report develops therapeutic treatments for degenerative diseases, like Alzheimer’s. Many healthcare and biotech stocks tend to have a high risk, high potential return profile, since the success of the companies is often reliant on the efficacy of new drugs and treatments.

Figure 2:undefinedCortexyme Nasdaq listed IPO.

Figure 2:undefinedCortexyme Nasdaq listed IPO.

CRTX shares fell a whopping 75% in a single trading day, after Bank of America downgraded the stock due to test setbacks on the Alzheimer’s treatment. Since then, the stock has reached very elevated short interest of 52% of the float. Retail investors on the main discussion forums have been particularly encouraged by a small float of 18 million shares leading to the possibility of a short squeeze.

Despite the company having only 37 employees and the stock being valued at only $370 million, CRTX received four Wall Street ratings in the past month. Consensus is a moderate buy and average price target sits at $67 —suggesting impressive 400%-plus upside potential.

Lastly, on December 1, the stock was one of the top 5 most mentioned on Reddit, ahead of multi-billion market cap stocks and well-known meme names, like GameStop  (GME) - Get GameStop Corp. Class A Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report.

Figure 3: Trending stocks on Reddit on December 1.

Figure 3: Trending stocks on Reddit on December 1.

Is the price right?

Looking at a company’s business fundamentals is only half the work needed to find a good stock. How much one pays to own the shares is a key factor in the success of any investment. This is why valuation analysis is so important.

Alpha Spread’s user-friendly platform allows you to estimate a stock’s fair value –through valuation multiples, discounted cash flow, and more. I believe that the service is a must for anyone looking to own the right stock at the right price. Check out alphaspread.com and get started with a 7-day free trial.

(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)