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Outside of reading companies’ fundamentals, investing often comes down to reading current market signals against the stock’s daily price. When investors are more confident that the stock price is lower than it should be, they engage in short-selling.

But short sellers have to cover their positions, i.e., buy back the shares they borrowed and sold. This introduces the short squeeze dynamic, as it is more difficult to exit short positions without increasing prices.

Most commonly, the short interest ratio, as the number of total shorted shares divided by the average daily trading volume (ADTV), is used as a nifty metric to that effect. Specifically, the days-to-cover ratio represents the total number of days for short sellers to repurchase their borrowed shares.

Investors should note that short interest data is typically reported with a hefty delay. Although settlement dates for days to cover are for the end of July, these stocks have ongoing bearish interest due to their distinct particularities. 

Beyond Meat (Nasdaq: BYND)

With close to 8 days to cover, Beyond Meat has 41% of its float shorted. Although year-to-date BYND stock is down 25%, it has been flat over the last month at -0.6% return. On August 7th, the plant-based meat company posted its Q2 financial results, showing a continued 8.8% YoY revenue decline to $93.2 million, generating $34.5 million net loss.

However, Beyond Meat managed to significantly improve its gross margin, up to 14.7%, which is the highest operational efficiency since Q3 2021. For the full year 2024, the company expects a $320 – 340 million revenue range, with further focus on cutting the fat and deploying on the EU market which has better meat-substitute reception.

For comparison, Beyond Meat had a $338.1 million net loss in sales for the full year 2023 against the $343.4 million total revenue. The company has been laboring under the market perception of seed oils, which are widely viewed as negative.

To that end, Beyond Meat’s 4th generation products, Beyond Burger and Beyond Beef, launched in April, having switched to monosaturated avocado oil. This appears to have had the intended effect as US retail channels showed 20.5% increased net revenue per pound year-over-year. 

It is the hope that new product launches in the largest European markets, from the UK and Germany to Netherlands and Belgium, will have even greater effect. As of June 30th, the company’s debt-to-equity ratio is -1.931, an improvement over -2.028 ending March 2024.

Presently priced at $6.11, BYND stock is below its 52-week average of $7.70, but significantly higher than the 52-week low of $5.13 per share. Nasdaq’s forecasting data points to $6 per share level as the high ceiling, with $4.92 as the average price target.

Phathom Pharmaceuticals (Nasdaq: PHAT)

With 14.6 days to cover, Phathom Pharmaceuticals has 48.64% of its float shorted. The biopharma’s flagship product is vonoprazan (Voquezna) for the treatment of non-erosive gastroesophageal reflux disease (GERD). The condition affects around 20% of the US population, according to NIH.

In July, the FDA approved Phathom’s vonoprazan in tablet form as the drug exited positive Phase 3 study. Ending June 30th quarter, the company reported an accumulated deficit of $1.1 billion, up from $928.6 million in the year-ago quarter.

In fact, Phathom’s net loss more than doubled year-over-year, at $174.3 vs $78.8 million (ending six months). At current price of $12.79 per share, PHAT stock is up nearly 40% year-to-date. Against the 52-week average of $9.85, PHAT is forecasted at $22 average price target per Nasdaq data. Even the low estimate of $12 is aligned with the present price level. 

Although vonoprazan is promising, last year’s delays related to cancer-causing agents (nitrosamine impurities) in commercial batches still make investors doubt if Phathom can deliver.

Groupon Inc. (Nasdaq: GRPN)

With 5.5 days to cover, Groupon has 37.15% of its float shorted. An online marketplace that connects merchants with consumers looking for discounts, Groupon enhances its deals with targeted advertisements.

Relying on the psychology of scarcity for timed discounts, Groupon gets a mediating commission out of each customer funneled to the local merchant. In Q2 earnings, Groupon reported a 3% YoY decline in $124.6 million revenue. Although this amounted to $9.4 million net loss for the quarter, it was still lower from the $12 million net loss in the year-ago quarter.

Free cash flow turned positive at $10.8 million. Nonetheless, the company’s net profits are highly cyclical with profitable quarters far in between. This is not surprising given that Groupon, as a mediator, connects businesses that are largely viewed as non-essential. 

Therefore, their sensitivity to economic cycles is transferred to Groupon. Although Groupon was born out of the 2008 era recession, it has yet to achieve consistent profitability to satisfy investor concerns.

Moreover, the more agile and domineering e-commerce and ad platforms, such as Amazon and Alphabet, make Groupon’s business model an uphill battle. Accordingly, current recession signals are likely to increase Groupon’s short interest further. 

Presently priced at $13.69 per share, GRPN stock is down 20% over the last three months. Against the 52-week average of $13.53, the average GRPN price target is $19.67, sandwiched between the low estimate of $11 and high forecast of $26 per share.

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