Through mid-April 2018, major U.S. indices have largely given up gains from the strong start to the year. As of this writing, only the Nasdaq remains positive in 2018, up around 3.64%. Meanwhile, the Dow Jones Industrial Average is down 1.56% and the S&P 500 has stumbled 0.63% year-to-date.
The recent slide in share prices largely stems from the recent trade war threats between U.S. and China. In addition, markets are concerned with the recent Syrian strikes and the possibility of escalating tensions with Russia. Overall, the markets have finally seen a reasonable correction, after experiencing one of the longest periods without a meaningful, healthy sell off.
However, data continues to show that overall health of the U.S. economy continues to remain upbeat and positive. While market sentiment may be cautious at the moment, here are four Nasdaq stocks that are ripe for a short squeeze.
Applied Optoelectronics, Inc. (NASDAQ: AAOI):
Applied Optoelectronics, Inc. is engaged within with design, manufacturer, and sale of fiber optic networking products and services. Among the fiber optic products offered include: optical modules, lasers, transmitters, transceivers, headend, node, and more. Applied Optoelectronics, Inc. primarily markets its line of fiber optic products towards internet service providers, data center operators, cable TV, telecommunications, manufacturers, and more.
As of April 2018, Applied Optoelectronics, Inc. has a market cap of $601.38 million, price-to-earnings (P/E) of 8.85, and forward P/E of 10.11. Furthermore, the company features a price-to-sales (P/S) of 1.57, price-to-book (P/B) of 1.76, and price-to-free-cash-flow (P/FCF) of 7.18. The company’s ample cash and equivalents gives the company a strong current ratio of 3.20. Management efficiency ratios are decent: return on assets (ROA) of 17.80%, return on equity (ROE) of 23.80%, and return on investment (ROI) of 18.60%. Applied Optoelectronics also features strong margins: gross margin of 43.50%, operating margin of 22.80%, and profit margin of 19.30%. The company maintains a massive short float of 71.25%, making the stock one of the most crowded short trades in the market currently.
The stock is down 20.17% year-to-date after the company reported a slightly disappointing fourth quarter earnings release and outlook. However, Jun Zhang, an analyst at Rosenblatt, estimates that Applied Optoelectronics, Inc. will see a rebound to its top-line results in the second quarter.
Gogo, Inc. (NASDAQ: GOGO):
Gogo, Inc. is a provider of aviation-based broadband connection and entertainment services. The company primarily operates three business segments: Commercial Aviation North America, Commercial Aviation Rest of World, and Business Aviation.
As of April 2018, Gogo, Inc. has a market cap of $786.96 million, P/S of 1.13, P/C of 1.92, P/FCF of 24.29, and a current ratio of 1.90. The company may not yet be profitable, but the company’s revenue growth has been upbeat. Gogo, Inc. has an extensive short float of 60.16%, as of April 2018.
Gogo, Inc. shares are down nearly 20% year-to-date, as the company’s fourth quarter earnings loss came in at 52 cents per share, compared to a loss of $0.34 the year prior. However, revenues during the fourth quarter came in at $188 million, an increase of 18% from the previous year.
Overall, as aviation Wi-Fi capabilities continue to mature and see greater demand, Reuters notes in a recent article that innovation within the industry is sparking a “gold rush.” Adding to the bullish outlook for the industry is also the recent report that Alphabet, Inc. (NASDAQ: GOOG) is in “advanced talks” to buy Nokia’s aviation Wi-Fi business.
Rent-A-Center, Inc. (NASDAQ: RCII):
Rent-A-Center, Inc. is engaged as a household durable goods retailer that offers leases and rent-to-own programs. As of December 31, 2017, the retailer maintained 2,381 stores across the United States, Canada, and Puerto Rico.
The rent-to-own retailer has a market cap of $564.80 million and sports a healthy dividend yield of 3.13%. Furthermore, Rent-A-Center, Inc. has a forward P/E of 14.76, P/S of 0.21, P/B of 2, P/C of 7.74, and P/FCF of 17.54. The company does have a sizeable debt pile, as seen with debt/equity of 2.47. Rent-A-Center, Inc. has a massive short float of 56.19%, as of April 2018.
Overall, Rent-A-Center may be down nearly 8% year-to-date, but the company does have some potential near-term catalysts that could really squeeze the crowded short sellers. According to a recent Reuters report, the company is currently weighing proposed buyout bids and expects to make a decision sometime during the second quarter. The company has been under intense activist pressure from Engaged Capital, LLC and Marcato Capital to sell itself and accept a buyout.
Match Group, Inc. (NASDAQ: MTCH):
Match Group, Inc. operates as a dating and relationships product and service provider. The company operates 45 brands, such as: Match, OkCupid, Tinder, PlentyOfFish, OurTime, Meetic, and many more. Match Group, Inc.’s products and services are active across 38 different languages and 190 countries.
The digital dating platform holding company has a market cap of $12.49 billion, as of April 2018. Furthermore, the company maintains a P/E of 29.08, forward P/E of 29.79, P/S of 9.39, P/B of 24.50, and P/FCF of 43.65. Match Group, Inc. does hold quite a bit of long term debt, as seen with its long-term debt/equity of 2.50. Management efficiency ratios are very strong: ROA of 16.20%, ROE of 63%, and ROI of 30.90%. Margins are almost just as impressive: gross margins of 79%, operating margins of 27.10%, and profit margins of 26.30%. Despite strong performance, short sellers are betting against a continuation of the upward momentum, as seen with a short float of 57.52%.
Match Group, Inc. has been a major winner through April 2018, surging 43.21% year-to-date. One of the key factors that could be influencing short sellers is the recent news that Bumble has filed a lawsuit against Match Group, Inc.’s Tinder for “confidential and trade secret information.” Bumble is seeking $400 million in damages. Interestingly enough, the Bumble suit comes a couple weeks after Match Group filed its own suit against the company for “patent infringement and misuse of intellectual property.” The legal battle could be a temporary reason for investors to be concerned with Match Group, Inc., but the fundamentals remain strong.
Disclosure: This article is for informational and entertainment purposes only. Spotlight Growth has not been compensated in any way, shape or form for the creation of this content. This article is strictly opinion, based on the current information made available on these companies. This article is not a recommendation to buy or sell any of the companies listed. We are not registered financial professionals and you should consult your own advisor to see if any investment is right for your portfolio.
