Wolfe Research has identified a list of stocks that are prime targets for short sellers, a strategy that involves borrowing shares of a target stock, selling them on the open market, and hoping for the price to decline. The firm uses various screens to analyze factors such as valuation, earnings quality, capital allocation, and sentiment to pinpoint stocks that are most vulnerable to a downward trend in price.
Tesla, a prominent player in the electric vehicle market, was among the top stocks listed by Wolfe Research, making an appearance on six out of 16 screens. Despite a stellar performance in 2023 where the stock doubled in value, Tesla has experienced a significant drop of over 29% this year. Analysts predict a meager 3% increase in the company’s stock price over the next year, with a majority holding a hold rating.
First Solar, another stock highlighted by Wolfe Research, has seen an impressive 60% surge in value this year, making it an attractive short selling candidate. However, analysts surveyed by LSEG anticipate a more than 6% decline in First Solar’s stock price over the next year, despite carrying a buy rating. Analysts like Morgan Stanley’s Andrew Percoco remain optimistic, citing factors such as artificial intelligence demand and policy support as reasons for potential upside.
Rideshare platform Lyft has appeared on four of Wolfe Research’s short screens, indicating mixed sentiment among analysts. The stock has seen a modest 3% increase in value this year, following a 36% rise in 2023. While most analysts have assigned a hold rating to Lyft, the average analyst foresees a more than 20% increase in the company’s stock price over the next year, according to LSEG.
Wolfe Research’s identification of potential short sale candidates sheds light on stocks that are perceived to be at risk of price declines. While some stocks like First Solar have shown strong growth, analysts remain cautious about their future performance. It is essential for investors to conduct thorough research and consider various factors before engaging in short selling activities to mitigate risks and make informed decisions.