Gap, On Holding, Global Foundries, Mobileye

As the market as a whole continues to break records and reach new heights, speculation and optimism are on the rise. During such periods, stocks with unusually high short interest tend to outperform, as overall market strength and bullish sentiment can overwhelm the fundamental reasons that led bears to initiate short positions.

Over the course of the previous year, several favorites with high short interest have emerged. Carvana Co. NYSE:CVNAAffirm Holdings, Inc. NASDAQ: AFRMand Upstart Holdings, Inc. NASDAQ: UPST are three stocks that have been grabbing headlines for quite some time due to their remarkable short-term interest and periods of incredible growth.

Recently, however, four familiar large-cap names have also seen their short interests rise to unusual levels: The Gap, Inc. New York Stock Exchange: GPSAbout the Estate NYSE: ONONGlobal Foundries Inc. NASDAQ: GFS and Mobileye Global Inc. NASDAQ: MBLY. Are some or all likely to experience an anomalous upward movement due to short interest? Or could the bears be sitting cute? Let’s take a closer look at each of them.

1. The Gap Inc.

Shares of retail apparel giant Gap have had an impressive run over the past year, with shares up 161% from the previous year. Year to date, GAP shares are up nearly 26%, significantly outperforming the sector and the broader market. Considering its impressive stock performance, it has a reasonably modest P/E of 19.6 and a dividend yield of 2.3%.

While the company has impressed with its stunning stock performance and latest earnings, sentiment remains overwhelmingly bearish. GPS has a significant short interest of 16.12%, for a total of 34.5 million shares sold short. Analysts are also not bullish on the stock, with a Hold consensus rating and a price target calling for a downside of more than 28%.

2. Waiting

Another retail company, On Holding, which develops and distributes sports products worldwide, has significantly outperformed this year. Year to date, ONON shares are up 27%. The company, which is strongly in growth mode, has a P/E of 126 and expects earnings growth of 40% for the full year.

With its impressive stock performance and lofty valuation, bears have taken notice. The stock boasts a notable short interest of 14.36%, equivalent to 29.7 million shares sold short. However, that figure declined 10% month over month.

3. Global Foundries

Global Foundries, which operates as a semiconductor foundry worldwide, has a P/E of 27.73, expected earnings growth of 110%, and has significantly lagged its industry and market this year. Year to date, shares are down 15.79% and are rapidly approaching bear market territory.

Not surprisingly, short interest has remained unchanged month after month while the stock has fallen. It is now approaching a significant support area and a potential breakdown level near $50. As of March 15, 15.88% of the float, or 12.5 million shares, had been sold short.

4.Mobileye Global Inc.

Mobileye is valued at $25.8 billion and operates in the field of advanced driver assistance systems (ADAS) and autonomous driving technologies. The company reported earnings on Jan. 25, beating EPS estimates and reporting revenue in line. For the full year ahead, the company expects earnings growth of 358%.

Analysts are bullish on Mobileye. Based on 18 analyst ratings, the stock has a Moderate Buy rating and a price target of an impressive 38% upside. Notably, its consensus rating is higher than other auto/tire/truck companies, which have a consensus of Hold, and the S&P 500, which is also Hold.

Despite analysts’ bullish sentiment, the stock has failed to deliver results this year, falling by more than 25%. As a result, short interest has remained stable in recent months, averaging 20% ​​below free float. As of March 15, 20.06% of the float had been sold short.

Will any of these high short interest stocks outperform?

While bullish market trends have benefited some companies, driving substantial price increases and challenging bears, others continue to navigate the complexities of investor skepticism and short-term interest rate dynamics. The ability of stocks with high short interest to outperform or underperform is closely tied to broader market forces, investor perceptions, and the evolving histories of the companies themselves.

So will market strength and positive investor sentiment help these high-short-interest stocks outperform? Or concerns about fundamentals will– what drove investors to short stocks to begin with – to prevail? Only time will tell.

Before considering GAP, you’ll want to hear this.

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