Since 2021, short squeezes have been among the highly talked about topics within the investor community. The major short squeezes in GameStop Corp. (GME), AMC Entertainment Holdings, Inc. (AMC), Bed Bath & Beyond Inc. (BBBY), and several other meme stocks by a community of retail traders caused significant losses for short sellers.
A short squeeze happens when a significant, short-term spike in a stock’s price forces short sellers to buy shares to minimize their losses. Buying shares to minimize losses leads to a further spike in the price. With the potential increase in short interest, Prime Medicine, Inc. (PRME), Tattooed Chef, Inc. (TTCF), and Electrameccanica Vehicles Corp. (SOLO) are primed for big short squeezes.
However, these stocks are rated F (Strong Sell) or D (Sell) in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
While any positive news could help trigger a short squeeze in PRME, TTCF, and SOLO, their bleak fundamentals and growth prospects make them best avoided now.
Prime Medicine, Inc. (PRME)
PRME is a biotechnology company that delivers genetic therapies to address diseases by deploying gene editing technology. The company offers Prime Editors with a Prime Editor protein, comprising a fusion between a Cas protein and a reverse transcriptase enzyme, and a pegRNA, which targets the Prime Editor to a specific genomic location and provides a template for making the desired edit to the target DNA sequence.
PRME might see significant short interest in the near term, given its weak fundamentals.
PRME’s 42.80% trailing-12-month gross profit margin is 23.4% lower than the 55.85% industry average. Its trailing-12-month EBITDA margin is negative 17.06% compared to the 2.72% industry average. Furthermore, the stock’s 0.16x trailing-12-month asset turnover ratio is 53.2% lower than the industry average of 0.35x.
PRME’s general and administrative expenses for the fourth quarter ended December 31, 2022, increased 33.9% year-over-year to $9.63 million. The company’s loss from operations narrowed 35.6% over the prior-year quarter to $38.69 million. Its net loss attributable to common stockholders narrowed 41.4% year-over-year to $40.60 million. In addition, its loss per share narrowed 86.7% year-over-year to $0.56.
Analysts expect PRME’s EPS for the quarter ending March 31, 2023, to be negative. The stock has declined 33.8% year-to-date to close the last trading session at $12.30.
PRME’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a D grade for Value, Momentum, and Quality. Within the F-rated Biotech industry, it is ranked #293 out of 379 stocks. Click here to see the other ratings of PRME for Growth, Stability, and Sentiment.
Tattooed Chef, Inc. (TTCF)
TTCF is a plant-based food company that produces and sells a portfolio of frozen foods. It supplies plant-based products to retailers. The company offers ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, cauliflower crust pizza, and plant-based burgers. TTCF has a short float of 34.8%.
On April 5, 2023, TTCF announced that it received a letter on March 31, 2023, from the Nasdaq Stock Market, LLC informing that the company was not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires companies to file all required periodic financial reports with the Securities and Exchange Commission (SEC). TTCF failed to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
TTCF’s 0.16% trailing-12-month gross profit margin is 99.5% lower than the 31.46% industry average. Its trailing-12-month EBIT margin is negative 39.75% compared to the 7.64% industry average. Furthermore, the stock’s negative 33.97% trailing-12-month levered FCF margin compares to the industry average of 2.53%.
For the fiscal third quarter that ended September 30, 2022, TTCF’s net revenue declined 6.7% year-over-year to $54.11 million. Its operating expenses increased 146.8% over the prior-year quarter to $31.57 million. The company’s loss from operations widened 352.7% year-over-year to $35.47 million.
In addition, its net loss widened 368.7% over the prior-year quarter to $38.50 million. Its loss per share widened 360% year-over-year to $0.46. Also, its adjusted EBITDA loss widened 395.8% year-over-year to $25.50 million.
For the quarter ended December 31, 2022, TTCF’s EPS is expected to remain negative. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 87.3% to close the last trading session at $1.42.
TTCF’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and Quality and a D for Growth and Sentiment. In the Food Makers industry, it is ranked #81 out of 82 stocks. To see the other ratings of TTCF for Value and Momentum, click here.
Electrameccanica Vehicles Corp. (SOLO)
Headquartered in Burnaby, Canada, SOLO is a development-stage company that develops, manufactures, and sells electric vehicles in Canada. The company operates in two segments, Electric Vehicles, and Custom Build Vehicles. Its flagship product is the SOLO, a single-seat vehicle. The company is also developing an electric two-seater roadster called Tofino. SOLO’s weak fundamentals might lead to a significant short interest in the stock in the near term.
On February 17, 2023, SOLO announced the voluntary recall of approximately 428 G3 vehicles, model years 2021, 2022, and 2023. The voluntary recall could hamper the financial performance of SOLO and negatively impact its reputation.
SOLO’s negative 126.30% trailing-12-month gross profit margin compares to the 35.03% industry average. Its trailing-12-month Return on Common Equity is negative 34.98% compared to the 11.79% industry average. Furthermore, the stock’s 0.02x trailing-12-month asset turnover ratio is 97.7% lower than the industry average of 1.03x.
SOLO’s gross loss for the third quarter ended September 30, 2022, widened significantly year-over-year to $955.07K. Its operating loss widened 27.8% year-over-year to $21.94 million. The company’s net loss widened 67.7% over the prior-year quarter to $21.54 million. Also, its loss per share widened 63.6% year-over-year to $0.18.
Analysts expect SOLO’s EPS for the quarter ended December 31, 2022, to remain negative. Its revenue for the same quarter is expected to decline 20.6% year-over-year to $1.20 million. It failed to surpass Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 74.1% to close the last trading session at $0.51.
The dismal prospect is mirrored in the POWR Ratings of SOLO. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and Quality and a D for Value and Sentiment. It is ranked #46 out of 57 stocks in the Auto & Vehicle Manufacturers industry. Click here to see the other ratings of SOLO for Growth and Momentum.
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PRME shares were unchanged in premarket trading Tuesday. Year-to-date, PRME has declined -33.80%, versus a 7.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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