What do you get when you mix a red-hot stock with a bunch of short-sellers? A big short squeeze – and the chance to make a bunch of money in a hurry.
That’s the exact setup I think we’re looking at with electric vehicle maker Rivian (RIVN).
When Rivian went public in late 2021, it was heralded as the next Tesla (TSLA). It had the potential to scale from a product prototype to millions of car deliveries – and billions of dollars of profits – in just a few years.
The ramp hasn’t gone smoothly. Throughout 2022, battery metal shortages, supply chain hiccups, runaway inflation, soaring interest rates, and a slowing economy all worked against the EV maker.. The company consistently delivered results below expectations. And Rivian stock collapsed.
But finally, it seems that trend is changing course.
Supply chain hiccups have been smoothed out. Inflation has crashed below 3%. Interest rates have topped out. The economy has restabilized.
And as all those factors have reversed for the better, Rivian’s growth narrative has turned around, too.
Just last night, Rivian reported second-quarter earnings. It didn’t miss estimates. Instead, it crushed them.
Rivian’s Impeccable Q2 Results
Rivian beat delivery and production estimates by 11%. And the firm topped revenue estimates by 18% and profit estimates by 22%.
Across the board, Rivian crushed quarterly estimates. Management also raised its full-year production and profit guidance.
It was a clean “beat-and-raise” quarter.
And underneath the hood, the growth trends looked fantastic. Rivian’s business is clearly starting to ramp.
Its production volume increased ~50% quarter-over-quarter. Delivery volumes rose almost 60%. And revenues rose 70% from last quarter.
Rivian delivered those huge growth numbers while preserving margins (gross margins improved more than 40 points in the quarter) and constraining spend (operating expenses rose just 7%).
It was a really strong earnings report.
Rivian Stock Is Headed for a Short Squeeze
In the first half of the year, a bunch of investors started to place bets against Rivian stock. Short interest in RIVN rose from less than 5% of the float in February to about 12% of the float in mid-June.
And between February and June, RIVN stock bounced between $12 and $16. That means all those short-sellers have a cost basis in that range.
Of course, that now means they’re way underwater.
Rivian stock has spiked to $25 – about double where it was earlier this year when all those short-sellers started betting against it.
And with Rivian dramatically increasing delivery and production volumes, profit margins expanding, losses narrowing, and the broader economic and market outlooks improving, the odds favor Rivian stock trending higher for the foreseeable future.
The shorts are feeling the heat. They’re already down big. And the odds favor them being down even more in a week, a month, a quarter, and a year.
That’s how you get a short squeeze.
A bunch of short-sellers bet against a stock. The bet goes wrong. The stock pushes higher. The shorts get nervous and start covering a little. The covering turns into a panic. Suddenly, everyone’s covering, and the stock squeezes higher.
That’s exactly what is about to happen to Rivian stock.
From a price perspective, we think a squeeze could drive Rivian’s stock price up to about $40. That’s the next real “volume shelf” for the stock, or the closest upside price levels where there was meaningful volume comparable to today’s.
The emerging short-squeeze opportunity in Rivian stock is tremendous.
But it is far from the only short-squeeze opportunity emerging these days.
The Final Word
In fact, our top EV stock to buy at the moment is one that has more than 25% of its float sold short.
Instead, we’re talking about a special battery maker that you’ve likely never heard of. That’s because, as far as we know, the mainstream media has never talked about this firm before.
Yet it is developing potentially game-changing technology in the world of electric vehicles.
And, yes, more than 25% of the stock’s float is sold short.
This is one that could be due for a huge short-squeeze in the coming weeks.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.