In the world of investing, no single rule needs to be followed. Whether technical, fundamentals, short-term trading or long-term investing, the bottom line is generating returns that consistently beat the index. One strategy that has worked in the last few years to generate quick returns is exposure to short-squeeze stocks.
The idea emerged during the euphoric rally for penny and meme stocks in 2021. The underlying logic is considering exposure to stocks where sentiments are overly bearish. The higher the short interest in these stocks, the bigger the likely short-squeeze rally.
IMAC Holdings (NASDAQ:BACK) is a good example of my point. The stock has skyrocketed by 225% in the last one month. The short interest in the stock is almost 95%. This column focuses on three stocks with high short interest that are likely to surge in Q2 2024.
Let’s discuss the reasons for being positive about these ideas in the coming months.
Blink Charging (BLNK)
Blink Charging (NASDAQ:BLNK) stock has plunged almost 70% in the last 12 months. The short interest in the stock remains high at 24%. I believe a strong reversal rally is on the cards from deeply oversold levels.
Among the positives, Blink has guided for revenue of $170 million for 2024. At the same time, the company has reaffirmed its guidance to achieve positive adjusted EBITDA by December 2024. EBITDA margin expansion will likely sustain in the next few years. The new manufacturing facility in Washington, D.C., will support margin expansion as it enhances the company’s vertical integration.
Another note is that the company raised $113 million through its at-the-market offering. The company ended 2023 with a strong cash buffer of $121.7 million.
At the same time, Blink paid off promissory notes and accrued interest of $45.5 million. With a de-levered balance sheet, margin expansion and ample headroom for growth, BLNK stock is attractive at current levels.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) stock has almost remained sideways in the last 12 months. This seems like a good accumulation opportunity. Considering the short interest of 32%, a massive short-squeeze rally is on the cards.
There are two other reasons to believe a breakout is on the cards. First, regulatory headwinds are waning for the cannabis sector. Germany has legalized cannabis and this sets the tone for other European countries. Further, there are calls for the reclassification of cannabis as a Schedule III drug in the U.S. With Presidential elections due later this year, I expect price-action for cannabis stocks.
Further, Aurora Cannabis has shown improvement in key business metrics. As an example, Aurora reported positive adjusted EBITDA for Q3 2024. This was the fifth consecutive quarter of positive EBITDA. Further, the company has guided for positive free cash flow for the calendar year 2024.
In the last few years, Aurora Cannabis has also focused on deleveraging. With a strong cash buffer, a presence in 15 countries and an expanding EBITDA margin, the outlook for ACB stock is bullish.
Lucid Group (LCID)
Lucid Group (NASDAQ:LCID) stock has been on a sustained downtrend. In the last 12 months, LCID stock has plunged by 70%. However, the short interest in the stock remains high at 32%. While I remain bearish on the long-term outlook for the company, I believe that a sharp rally is likely from deeply oversold levels.
It’s worth mentioning at the onset that Lucid has disappointed investors. The company was once touted as a Tesla (NASDAQ:TSLA) competitor. However, business progress has been slow, cash burn has been significant and delivery growth remains unimpressive. It’s, therefore, not surprising that investors have punished LCID stock.
In terms of positives, Lucid ended 2023 with a liquidity buffer of $4.78 billion. In March, the company received $1 billion in fund infusion from Ayar Third Investment Company. Therefore, there is ample financial flexibility for investments. It remains to be seen if Lucid can accelerate deliveries in the coming quarters.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.