The stock market has been witnessing a short-squeeze wave over the past few months, driven primarily by the actions of a group of millennial investors seeking to squeeze short sellers out of their positions by betting against them on the stocks of struggling businesses. In the booming electric vehicle (EV) market, we think struggling players Nikola (NKLA), Blink Charging (BLNK), and Workhorse (WKHS) could be the next short-squeeze targets. Let’s discuss this.Growing investor excitement about the automotive sector going electric was reflected in electric vehicle (EV) stocks’ impressive rally in 2020. Improved automotive performance, government subsidies, and cost-efficiencies have been motivating consumers to switch to EVs. As a result, the booming EV space has been birthing many new companies, arguably overcrowding the industry.
But not all the players in this booming market possess sound fundamentals. In fact, many EV players have been witnessing corrections this year due to investor concern over the industry’s overvaluation, and production delays due to a global semiconductor shortage. Investors’ bearish outlooks are often manifested in their short-selling activity as they bet against stocks that they believe have become overvalued relative to the fundamentals and are due for a pullback. Short percentage of float is one of the commonly used metrics for understanding how aggressive a stock's short sellers have been. Thanks to the actions of Reddit's WallStreetBets forum, many investors have lately been introduced to the short squeeze. Experts believe that this bullish market may keep the trend going and many highly shorted stocks could get caught up in this short squeeze frenzy.
Nikola Corp. (NKLA), Blink Charging Co. (NASDAQ:BLNK), and Workhorse Group, Inc. (WKHS) are three EV players in the EV market that have been aggressively shorted by investors. Their weak fundamentals and other recent developments are raising red flags and, hence, we think it could be wise to avoid these stocks now.