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Has SPRT’s Short-Squeeze Play Run Out of Steam?

Stock MarketsSep 17, 2021 07:00PM ET
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© Reuters. Has SPRT’s Short-Squeeze Play Run Out of Steam?

Buy-and-hold strategies continue to be the norm for most investors. Picking high-quality companies, with excellent cash flows and bright futures, is a top method for building wealth over the long-term.

Lately however, many retail investors have made fortunes buying short-squeeze stocks. Whether investors classify these stocks as meme stock plays or short-squeeze plays, companies like Support.com (SPRT) have been highly volatile of late.

SPRT stock traded around the $2 level a year ago. On Aug. 27, this stock hit a high of nearly $60 per share, before falling more than 80% to its current levels.

Thus, the question for SPRT stock is whether the party is over, or another short-squeeze surge could be on the horizon. Let's dive into what key drivers investors should have on their radar for this stock.

I currently remain neutral on this stock, for various reasons. (See Support.com stock charts on TipRanks).

Why is Support.com Stock Going Down?

A massive sell-off is currently underway with SPRT stock, and this stock has garnered a ton of attention accordingly.

However, the retail movement appears to be strong. Investors looking at short positions increasing are focusing in on the idea that this stock has a higher likelihood of squeezing. However, what seems to be the case (or at least what the data suggests), is that short-sellers are doubling down on their positions as they see a profit opportunity here.

Accordingly, SPRT stock could be the next high-profile hedge fund versus retail battlefield.

As per the latest updated short interest data, there has been a steady increase this year in the short percentage of the free float. Considering the utilization and short interest in SPRT stock, this company has become a hot-button topic among those on r/WallStreetBets, and elsewhere.

Obviously, short-sellers view the valuation of Support.com as untenable. However, retail investors have reason to be bullish. These kinds of short interest level and borrow fee rates are incredible. There's a high potential of this stock squeezing, relative to most stocks in the market.

Who will win? Right now, we don't know. However, SPRT stock is certainly shaping up to be an intriguing and highly volatile stock to watch from here.

Short Squeeze Prediction of SPRT Stock

Retail investors certainly believe they have the potential to bring SPRT stock and other short-squeeze stocks back to life. Those bullish on the short-squeeze potential note that the IPO price of Support.com stock was around $90 per share when this stock went public. Asserting that this stock couldn't breach this level in a squeeze-type scenario perhaps isn't unfounded.

However, Support.com remains a stock with generally bearish sentiment right now. The bears are winning, as evidenced by stock's recent drops. If this momentum continues, there's little hope for those betting on a short squeeze.

That said, predictions that SPRT stock could surge to more than $100 per share have many retail investors hungry right now.

Bottom Line

Support.com is a company that perhaps perfectly describes what a momentum stock is. When times are good, this stock surges. However, when the momentum turns, the downside can be disastrous.

Accordingly, SPRT stock is only a viable option for those willing and able to handle the volatility.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Has SPRT’s Short-Squeeze Play Run Out of Steam?
 

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