They’re back! Meme stocks are making headlines as retail investors turn their attention to widely shorted companies such as department store chain Kohl’s (KSS) and real estate firm Opendoor (OPEN).
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The growing interest in heavily shorted stocks comes after Kohl’s surged 37% higher in volatile trading on July 22 as retail investors touted the stock on social media and tried to execute a short squeeze on it. Individual investors bought $9.64 million of Kohl’s shares, the most by this category of investors in about three years, according to market data.
Kohl’s, which has struggled financially since the COVID-19 pandemic and is highly shorted on Wall Street, is the third-most-trending ticker on the website Stocktwits, a retail investor social media platform. Opendoor Technologies, an online company that buys and sells residential real estate, has seen its share price rise 440% so far in July as retail investors also treat it as a meme stock.
Other Names
Other highly shorted stocks that are getting attention from retail investors include struggling names such as doughnut chain Krispy Kreme (DNUT) and camera maker GoPro (GPRO). Krispy Kreme’s share price has jumped 16%, building on a nearly 27% surge on July 22. About 14% of Krispy Kreme’s outstanding shares are shorted.
Camera maker GoPro saw its stock rise nearly 50% in a single trading session. Short interest in that stock was last at 8%. Another highly shorted stock, with short interest of 37% currently, is plant-based meat company Beyond Meat (BYND), whose shares jumped 10% in premarket trading on July 23. A meme stock is a security that gains popularity among retail investors through social media.
Short Squeeze
Investors seek to execute a short squeeze on struggling stocks that have a high short interest among Wall Street firms and hedge funds. A short squeeze occurs when the price of a stock rises to such an extent that investors who have sold short must also purchase shares to limit their losses, causing the price to rise sharply.
Meme stocks last took the investing world by storm in 2021 when retail investors targeted companies such as GameStop (GME) and BlackBerry (BB) for short squeezes. Meme stocks tend to surface when bull rallies are accelerating and markets are at or near all-time highs as they are currently.
Is KSS Stock a Buy?
The stock of Kohl’s has a Moderate Sell rating among 12 Wall Street analysts. That rating is based on five Hold and seven Sell recommendations issued in the last three months. The average KSS price target of $6.83 implies 43.69% downside risk from current levels.
