To short a stock, a trader has to borrow it first and then sell it on the market, hoping to profit as the stock price goes lower. But sometimes, the stock goes up and forces anyone who is short to buy back the stock and return it to the lender. This buying pressure to cover their positions is known as a short squeeze.

Because the interest for shorted stocks remains, Finbold analyzed the most shorted stocks this year and selected the two with a high potential to soar.

Luminar Technologies (NASDAQ: LAZR)

Luminar Technologies is an automotive technology company specializing in vehicle safety and autonomy. Some of the company’s products include Iris lidar, Core Sensor Software, Perception Software, and Sentinel. Most of these products are used in electric vehicles by companies like Volvo, Audi, Toyota and Mercedes.

Luminar is among the top five shorted stocks with a 30% of float shorted. The company recently reported strong Q2 results, with revenue up 64% compared to the same quarter of last year, and it maintained a strong cash position. Luminar expects at least 100% revenue growth this year, which could potentially create a short squeeze.

Meanwhile, Morningstar’s quantitative equity report has put a fair value estimate at $9.54, 64% above the current market price of $5.79.

Morningstar quantitative equity report. Source: Interactive Brokers Fundamentals Explorer

Sunnova Energy International (NYSE: NOVA)

Sunnova is a residential solar and energy storage service provider in the US. The company provides operations, maintenance, monitoring, repairs, replacement, equipment upgrades, power optimization and diagnostics.

Similar to Luminar, Sunnova has 30% of floating shares shorted. The company reported Q2 losses and missed revenue estimates, which makes it a risky play if you’re looking to benefit from a short squeeze.

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Despite that, Morningstar’s quantitative equity report puts a $19.68 fair value on the stock price, which is 47% above the current market price of $13.35.

Morningstar quantitative equity report. Source: Interactive Brokers Fundamentals Explorer

Even though Luminar is heavily shorted, it still outperformed the S&P 500’s 14% return with a 23% return year to date. Sunnova, on the other hand, is down 24% during the same period.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

The post Short squeeze alert for August 21st: Two stocks with the potential to skyrocket appeared first on Finbold.

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Dennis is a business and financial writer, who had spent almost his entire life independently reporting on different business ventures with major impact on the US and global economy. Dennis places a special focus on examining tech stocks, biotech stocks all while investing a great part of his early hours to researching and writing on the companies in the US markets. Dennis has 15+ years of experience in financial markets.