Technology stocks saw a major sell off recently, with the NASDAQ-100 Index closing down over 2% recently. That in mind, some traders are calling this a correction, and consequently, they might be looking to get short some technology stocks. However, when traders are looking to get short a stock, they tend to look at the short interest, which could give an idea of the overall sentiment in the name. For example, if a stock has a low short interest, market participants might be bullish on the name. However, if a stock has a high short interest, the overall sentiment on the stock would be considered bearish. That said, if you’re bearish on the technology sector, you might want to check out these small-cap technology stocks with high short interest.
Short Interest In Technology Stocks
The short interest is the number of shares that market participants sold short, but have not yet closed out their positions. The short interest is calculated by dividing the number of shares short by either the number of shares outstanding or the number of floating shares. Now, most data providers, like Morningstar, calculate the short interest by dividing the amount of shares short by the amount of floating shares. This is also known as the short float.
That said, if there are a lot of shares short, in relation to the number of floating shares, this is an indication that traders are bearish on the name, and are looking for the stock to fall. Keep in mind that when a stock has a high short interest, it could be subject to a short squeeze.
A short squeeze typically occurs when there is a positive catalyst, coupled with a high short interest. When a company reports positive news, buyers step in, and since there is a high short interest, in this case, some market participants may be forced to close out their short position. Consequently, this would add to the buying pressure, and in turn, more shorts may cover, spiraling into a short squeeze. That in mind, when there is a positive catalyst and a high short interest, you’ll see small-cap stocks with high short interests could rise significantly.
Moving on, let’s take a look at some small-cap technology stocks that currently have high short interests.
Sunrun Inc (NASDAQ: RUN) is one of the largest dedicated residential solar companies in the U.S. The company established its solar as a service back in 2007, and it’s continuing to become a leader in the industry, when it comes to providing clean energy to homeowners with little to no upfront costs. WIth Trump as President, the solar industry has taken a hit, as there has been more of an emphasis on traditional energy. Now, although Sunrun is a solar company, it’s also considered a technology stock, in the specialized semiconductor industry, according to Finviz.
Here’s a look at RUN on the daily chart.
According to Morningstar, RUN is down over 15% over the past year, as of June 9, 2017. However, the stock has been up just over 3% over the past three-month period and over 10% over the past month.
Let’s get into some short interest statistics now. Sunrun Inc currently has 105.44M shares outstanding and 68.03M shares floating. That in mind, only 68.03M are available for trade on the open market, which is just around 65% of the shares outstanding. Now, Sunrun has 19.57M shares short, as of May 31, 2017. Consequently, the stock has a short float of 28.77%, and the short ratio, or days to cover, is 16.47 days. Now, between May 15, 2017 and May 31, 2017, the short interest change was 15.55%.
That said, this could be an indication the market participants are bearish on the stock. Now, keep in mind that since Sunrun has a short interest of over 25%, it could be subject to a short squeeze if there is a positive catalyst, such as company news or changes in the industry.
Fitbit Inc (NYSE: FIT) was founded in 2007 and is a provider of health and fitness devices. Now, Fitbit’s platform combines connected fitness and health devices with software and services. The company currently offers an online dashboard, data analytics, motivational and social tools and virtual coaching, just to name a few. Fitbit aso offers fitness devices, including Fitbit Zip, Fitbit One, Fitbit Flex, Fitbit Flex 2, Fitbit Chart, Fitbit Blaze, Fitbit Alta, Fitbit Chart 2, Fitbit Charge HR and Aria.
Fitbit Technology has been operating at a loss, and consequently, it does not have a price-to-earning ratio, while the scientific and technical instruments industry average was 29.3. The company currently has a price-to-book ratio of 1.2, while its industry average was 4.1. Additionally, Fitbit had a trailing 12-month price-to-sales ratio of 0.6, while the industry average was 2.9.
As of June 9, 2017, Fitbit was down over 60% over the past one year. Additionally, the stock was down nearly 30% year to date, and over 11% over the past three months.
Check out Fitbit on the daily chart here:
Just by looking at the chart, it gives you an indication that the stock is weak, and near
Its 52-week lows, and therefore, some traders may be bearish on the stock.
That in mind, let’s move onto some short interest statistics.
As of May 31, 2017, Fitbit had 228.52M shares outstanding and 171.38M shares floating, according to Morningstar. The stock had 37.83M shares short, and consequently, it had a short interest of 22.07%, when comparing the number of shares short to the amount of floating shares. Moreover, Fitbit had a short ratio, or days to cover, of 4.24. Again, since Fitbit has a high short interest, it could potentially experience a short squeeze, if and when, there are positive developments in the company.
The Bottom Line
Technology stocks have experienced some volatility recently, and some traders may be thinking that this could lead to a correction in the sector. That in mind, you might want to examine Fitbit and Sunrun further, to get an idea of its short statistics. However, since these stocks have been beaten up and near their 52-week lows, they could experience a short squeeze, which could cause these stocks to rebound significantly.