3 Low-Rated Stocks Could See Short Squeezes
Several recent short squeezes have generated outsized returns for investors, who are now keeping a close watch on potential candidates.
Investors are now paying close attention to potential short squeezes. In the past, several short squeezes have led many investors to generate large returns. Prime Medicine (PRME), Electrameccanica Vehicles, Tattooed Chef and TTCF could all be potential short candidates. These stocks are still rated as Strong Sell or Sale in our proprietary system of POWR Ratings. Let's discuss....
Short squeezes are a hot topic among investors since 2021. Short sellers suffered significant losses after a group of retail traders sucked in GameStop Corp., AMC Entertainment Holdings, Inc., Bed Bath & Beyond Inc., and other meme stocks.
Short squeeze occurs when a sudden, significant spike in the price of a stock forces short sellers into buying shares to reduce their losses. A further price spike occurs when short sellers buy shares to reduce their losses. Prime Medicine, Inc., Tattooed Chef, Inc., and Electrameccanica Vehicles Corp. are all primed to experience a big short squeeze due to the increase in potential short interest.
These stocks are still rated D (Sell), or F (Strongly Sell) by our own POWR Ratings System. POWR Ratings is calculated by weighing 118 factors to the optimal degree.
Although any positive news may help trigger a quick squeeze in PRME, TTCF, and SOLO, their bleak growth prospects and fundamentals make them the best to avoid now.
Prime Medicine, Inc. (PRME)
PRME is a leading biotechnology company specializing in gene editing technologies to treat diseases. Prime Editors are offered by the company. They consist of a Prime Editor, which is a protein fusion between Cas and reverse transcriptase, and pegRNA. The latter targets the Prime Editor at a specific genomic site and acts as a template to make the desired edits to the target DNA.
PRME could see a significant amount of short interest in near-term, given its weak fundamentals.
PRME's gross profit margin of 42.80% for the trailing 12-month period is 23.4% less than the industry average of 55.85%. The EBITDA margin for the trailing 12 months is negative 17.06%, compared to a 2.72% average. The stock's 0.16x asset turnover ratio for the trailing 12 months is 53.2% less than the average industry of 0.35x.
PRME's General and Administrative expenses for the fourth-quarter ended December 31, 2020 increased by 33.9% over the previous year to $9.63 millions. The company's operating loss decreased by 35.6% compared to the previous quarter, reaching $38.69 millions. The company's net loss attributable common stockholders decreased by 41.4% over the past year to $40.60 millions. Its loss per share also decreased 86.7% from the previous year to $0.56.
Analysts predict that PRME will have a negative EPS in the quarter ending March 31st 2023. The stock is down 33.8% for the year to date, closing at $12.30 in the last trading session.
The weak fundamentals of PRME are reflected by its POWR ratings. The stock is rated D, which is equivalent to Sell in our proprietary system. The POWR ratings are calculated using 118 factors with each factor being weighted optimally.
It is rated D for Value, Momentum and Quality. In the F-rated biotech industry, this stock is ranked 293rd out of 379 stocks. Click here to view the other ratings for PRME in terms of Growth, Stability and Sentiment.
Tattooed Chef, Inc.
TTCF, a company that manufactures and sells frozen foods, is a plant based food producer. The company supplies products made from plant-based ingredients to retailers. The company provides ready-to cook bowls and burgers. It also offers zucchini spirals and riced cauliflower. TTCF's short float is 34.8%.
On April 5, 2023, TTCF reported that on March 31, 2023, it had received a notice from Nasdaq Stock Market, LLC that informed the company that they were not in compliance with Nasdaq Listing Rule (5250(c)(1)), which requires that companies file all periodic financial reports required by the Securities and Exchange Commission. TTCF did not file its Form 10-K Annual Report for the fiscal period ended December 31, 2022.
TTCF's 0.16% gross profit margin for the trailing 12 months is 99.5% less than the industry average of 31.46%. The trailing-12 month EBIT margin of TTCF is negative 39.75%, compared to an industry average of 7.64%. The stock's negative trailing-12 month levered FCF is 33.97% lower than the industry average, which is 2.53%.
TTCF's net revenues for the third fiscal quarter ending September 30, 2022 decreased 6.7% from the prior-year quarter to $54.11 millions. Operating expenses increased by 146.8% compared to the previous quarter, reaching $31.57 millions. The loss from operations of the company increased 352.7% over the previous year to $35.47 millions.
Its net loss also increased 368.7% compared to the previous quarter, reaching $38.50 millions. The loss per share increased 360% over the previous year to $0.46. Its adjusted EBITDA loss increased by 395.8% to $25.50 millions.
TTCF is forecast to have a negative EPS for the quarter ending December 31, 2022. In each of the four previous quarters, it failed to exceed the consensus EPS estimate. The stock price has dropped 87.3% in the last year to $1.42 at the close of the last trading day.
The POWR ratings reflect TTCF’s poor prospects. It has an F-rating, which is equivalent to a Strong Sell according to our proprietary rating system.
It is rated F for Quality and Stability, and D for Growth. It is ranked #81 of 82 stocks in the Food Makers sector. Click here to see the other ratings for TTCF's Value and Momentum.
Electrameccanica Vehicles Corp. (SOLO)
SOLO, a Canadian company with its headquarters in Burnaby (Canada), is in the development stage. It develops, produces, and sells electric cars in Canada. The company is divided into two segments: Electric Vehicles and Custom Build Vehicles. The SOLO is its flagship vehicle, a one-seater. Tofino, a two-seater electric roadster is also being developed by the company. The weak fundamentals of SOLO could lead to significant short interest for the stock.
SOLO announced on February 17, 2023 the voluntary recall of 428 G3 models, with model years 2021-2022 and 2023. The voluntary recall may negatively affect SOLO's financial performance and reputation.
The industry average gross profit margin is 35.03%. SOLO's 126.30% negative trailing-12 month gross profit margin is compared to that of the industry. The trailing-12 month Return on Common Equity of SOLO is negative 34.98% compared to an industry average of 11.79%. The stock's asset turnover ratio of 0.02x for the trailing 12 months is 97.7% less than the industry standard of 1.03x.
The gross loss of SOLO for the third quarter ending September 30, 2022 increased significantly from year to year, reaching $955.07K. The operating loss increased by 27.8% to $21.94 millions. The net loss of the company increased by 67.7% compared to the previous quarter, reaching $21.54 millions. The company's loss per share increased 63.6% over the previous year to $0.18.
Analysts predict that SOLO's earnings per share (EPS) for the quarter ending December 31, 2022 will remain negative. Analysts expect its revenue to drop 20.6% from the previous year to $1.20million. In each of the four previous quarters, it failed to exceed Street EPS expectations. The stock price has dropped 74.1% in the last year to $0.51 at the close of the last trading day.
The POWR Ratings for SOLO reflect the bleak outlook. Its overall rating is F, which in our rating system translates into a Strong Sale.
It is rated F for Stability, Quality and Value. The grade for Sentiment and Value is D. It is ranked 46th out of 57 stocks within the Auto & Vehicle Manufacturers sector. Click here
Take This into Consideration Before You Place Your Next Trade...
We are still in a bearish market.
Some stocks, like those discussed in this article, may rise. Most will fall as the bear markets claws lower and lower.
Steve Reitmeister, a 40-year investment veteran, has just released the "REVISED:2023 Stock Market Outlook". He explains it as follows:
This presentation is timely and you owe yourself to view it before making your next trade.
PRME shares were unchanged during premarket trading on Tuesday. PRME shares have declined by -33.80% year-to-date compared to a 7.63% increase in the benchmark S&P 500 Index during the same time period.
About the Author: Dipanjan Bánchur
Dipanjan has been interested in stock markets since he was a child. Dipanjan obtained a Master's Degree in Finance and Accountancy. Dipanjan is a financial journalist and investment analyst. He has a keen interest in reading about and analyzing new trends in the financial markets.