The Potential for Short Squeezes in CarMax and MicroStrategy Stocks
The stock market has had a rough start in 2024, with many equities experiencing a sell-off despite positive factors such as potential interest rate cuts by the Federal Reserve. However, investors are actively looking for money-making opportunities, and short squeezes have emerged as a potential strategy.
CarMax (NYSE: KMX)
CarMax, the used vehicle retailer, has seen positive stock performance over the past year, with modest gains of nearly 4%. The company has taken steps to build its valuations, including reinstating its stock buyback plan and achieving notable profitability in the fiscal third quarter ending November 30.
These factors make CarMax a potential candidate for a short squeeze, especially considering its 11% short interest relative to its float. Additionally, 10 Wall Street analysts express optimism about CarMax’s outlook.
However, challenges lie ahead for CarMax, such as waning interest in the used car market due to rising auto loan delinquency rates and depreciation in wholesale values. The stock is currently priced at $69.62.
MicroStrategy (NASDAQ: MSTR)
MicroStrategy, a company with links to the cryptocurrency space, faces challenges as its stock price has turned red following the approval of spot Bitcoin exchange-traded funds (ETFs) in the United States. Previously seen as an ideal proxy investment for Bitcoin, investors now have alternative means to gain exposure to the asset.
Despite these challenges, MicroStrategy continues to accumulate Bitcoin and holds almost 190,000 BTC. The current percentage of shares shorted is 19.83%, representing over 2.8 million shares. A potential short squeeze may occur if the value of Bitcoin surges again.
Three Wall Street analysts offer a 12-month forecast for MicroStrategy, with an average price target of $687. However, the stock is currently down almost 30% in 2024, trading at $482.14.
Hot Take: Short Squeezes Offer Opportunities Amidst Market Uncertainty
In conclusion, while CarMax and MicroStrategy have short squeeze potential, predicting their patterns remains challenging due to overall market sentiments. However, if executed strategically, short squeezes can offer opportunities for investors to navigate the current environment and potentially profit from stock surges.
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