SSelling stocks short can bring big profits to an investor, but the risk is also proportional. Basically, the short trader is betting that a security will go down; this is the opposite of most stock trading, in which the investor wants the stock to win.
Winning, of course, is the risk in a short trade. There is no cap on a stock’s potential earnings, and in theory, a particular stock can see its price increase ad infinitum. But in a short sale, the trader made the initial trades in the borrowed stocks – this is called a short sale because the trader made stock purchases using stocks he did not know. do not own and is ready to return. The position is closed when the trader buys the original shares in the open market – and if he buys them for less than the original loan, he will make a profit on the difference.
Short trading is not for the faint hearted. But it still remains a popular trading strategy, and as we saw earlier this year in GameStop’s now infamous Short Squeeze, short selling can have a profound impact on the markets.
With that in mind, we turned our attention to three stocks that have been sold heavily short in recent weeks, and we used the TipRanks Database to find out where they stand. The results are interesting – these are “hard buy” stocks with notable support from top analysts – that is, analysts with the best rating history.
We’ll start with PubMatic, a software company in the marketing and advertising industry. PubMatic’s software platforms target digital publishers and provide tools for media buyers and application developers. The company boasts of being able to improve monetization rates and ad quality, thereby increasing revenue and ROI for publishers and advertisers. Every day, PubMatic sees more than 1,000 billion advertiser auctions on its platforms and processes more than 2 petabytes of new data.
Right now, PUBM stocks are one of the highest selling stocks on the market, with short term interest at 55%. This is a clear sign that this stock has been targeted by short sellers.
The share price also presents an interesting picture. PubMatic went public in December of last year, and PUBM shares peaked at nearly $ 70 in early March. Since then, the stock has fallen, coincidentally, by 55%.
During its six months as a public entity, PubMatic published two quarterly earnings reports. The second report, for 1Q21, showed revenue of $ 43.6 million, up 54% year-on-year, but down 17% sequentially. Profits, at 9 cents per share, showed a similar trend. EPS increased significantly from the break-even point released a year ago, but down sharply from the 39-cent profit recorded in 4Q20. On a healthy note, PubMatic ended the first quarter with $ 110 million in cash and no debt.
Relatively New Stock Caught JMP Securities Analyst’s Attention Ronald josey, which holds 5 stars from TipRanks and is ranked 32nd among all Wall Street analysts.
“Simply put, PubMatic is performing exceptionally well. All industries except Politics and Travel grew by 50% + Y / Y, majority of revenue is now associated with an alternate ID which is not based on cookies nor IDFA, and SPO as a share of ad spend almost doubled Y / Y in the quarter. With ad spend consolidation likely to continue, the majority of PubMatic’s revenue could come from SPO deals over time and OTT / CTV a catalyst for further spending growth as the estimated $ 230 billion in TV spending As global markets are increasingly moving to data-driven programmatic sales channels, we believe PubMatic has a long track record of sustaining high levels of growth, ”said Josey.
These comments confirm Josey’s outperformance (i.e. buy) rating on PUBM stocks. Its price target of $ 64 implies a hike of around 85% for the coming year. (To see Josey’s record, Click here)
The consensus strong buy opinion on PubMatic shares is based on 7 analyst reviews, broken down into 6 buys and 1 hold. The average price target is $ 52.40, which suggests an increase of about 52% from the trade price of $ 34.51. (See the analysis of PUBM stocks on TipRanks)
Next, Ontrak, is a data and analytics technology company that lives in the healthcare industry. Ontrak occupies a unique niche, using AI to power a platform that tracks and monitors chronic patient health issues – not always the primarily diagnosed disease, but the underlying chronic issues, both systemic and behavioral, that can make the disease worse. The goal is behavior modification, both to improve health outcomes and to achieve cost savings in the health system. Ontrak’s service has been shown to reduce medical costs by up to 40% in some cases.
So Ontrak has a successful product – but inventory fell from early February through March, after the company was told it had lost the contract with Aetna, its biggest customer. This news lowered the forecast for 2021 and caused a massive sell-off; OTRK shares are still down 65% from their January 27 peak.
Which would appear to be the 33.32% short interest on the stock. Ontrak is currently one of the 20 most heavily shorted stocks in the market.
There was good news for Ontrak in the first quarter, however, and the quarterly earnings release highlights some of it. Revenue was $ 28.7 million, down slightly from the previous quarter, but still the second highest revenue in the past two years. Year over year, revenue increased 133% and operating cash flow went from a loss of $ 3.1 million a year ago to a net amount of 6.4 million dollars available in the first quarter. And good news for the company’s program, a study of treatment effects showed Ontrak produced significant results for medical providers: a 64% drop in inpatient admissions and a savings of $ 486 per member. and per month.
André D’Silva, 5-star analyst at B. Riley Securities, acknowledges the headwinds in Ontrak, in particular the loss of Aetna and its impact on revenues and profits. However, he totally agrees with the Bulls when it comes to the way forward for the business.
“While sales are significantly impacted, the termination is expected to result in increased member conversion rates, higher ASPs and increased gross margins for OTRK … Considering the strong activity in 1Q21 and existing businesses outside Aetna (54% or ~ $ 15.5 million of 1Q21 sales weren’t linked to Aetna), we believe the revised guide is conservative and does not reflect the signing of new logos, ”said D’Silva.
To that end, D’Silva sets a price target of $ 58 on OTRK stocks, indicating his confidence in a 66% 12-month upside potential and supporting his buy rating on the stock. (To see D’Silva’s track record, Click here)
What do other analysts have to say? 5 Buys and 1 Hold is a consensus of Strong Buy analysts. Ontrak shares are priced at $ 34.90 and have an average price target of $ 41, which suggests a 17.5% year-over-year increase. (See the analysis of OTRK shares on TipRanks)
We will complete this short inventory list with PRTS or CarParts.com. This e-commerce company enables consumers to easily and inexpensively purchase quality auto parts by postman directly. CarParts.com cuts out middlemen and physical infrastructure, and its combination of low cost and fast delivery served the business well during the corona crisis.
This could explain the course of action. Over the past 12 months, PRTS shares have risen 107%. As for short sellers, PRTS caught their attention. The stock has a short interest of 25.11% and is among the top 20 selling stocks currently.
In May, the company released its 1Q21 results and stocks have slowly risen since. CarParts.com posted 65% year-over-year growth in quarterly sales, to a record high of $ 144.8 million, and marked its 5 consecutive quarter of year-over-year revenue gains. The company posted gross profits of $ 49.2 million, also up 65%, and plans to expand its distribution center in Texas to more than 1 million square feet.
From Roth Capital, Darren Aftahi, another 5-star analyst, writes on CarParts.com: “The PRTS always seems to be operating essentially at ‘full capacity’, which means it is selling as much as it can be, based on stock levels. current. We believe this is probably the reason for the “active discussions” to expand its TX DC by around 75%, which would provide a greater increase in long-term inventory and allow sales to increase, although likely with a “full” impact of 2022 and beyond. With the potential expansion, we believe that additional operating leverage could be obtained due to the existing footprint / overhead. “
The analyst summed up: “Stocks remain attractive as a ‘no growth stock’ at around 1.3x FY21 sales versus projected ~ 21% year-over-year growth versus growing peers. higher between 2x-4x … “
Aftahi’s bullish outlook leads him to give the stock a buy rating, and his price target of $ 30 implies a rise of about 65% for the coming year. (To see Aftahi’s record, Click here)
Overall, there are only 3 recorded reviews for this title, but all of them are positive, which makes the consensus purchase rating very unanimous. The shares are trading at $ 18.20 and have an average target of $ 23, which is about a 26% year-over-year increase. (See the analysis of PRTS shares on TipRanks)
To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best stocks to buy, a recently launched tool that brings together all the information about TipRanks shares.
Warning: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.