Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
Traders shorting Tesla (NASDAQ: TSLA) and MicroStrategy (NASDAQ: MSTR) have lost billions over the last two months as these stocks kept reaching new yearly peaks. Even after the most recent market price correction, they are rallying again.
But which overvalued stocks could bring more consistent short-selling profit in 2025? Each time short sellers have to cover their positions, they create buying pressure, forcing them to buy back the shares they initially sold.
Sufficient trading demand creates a feedback loop that leads to a short squeeze that rapidly amplifies stock price. That is if shares experience high short interest and low float as catalysts. The recently injected uncertainty about the Fed’s interest rates in 2025 further creates a fertile ground for such speculative trading behavior.
TradeZero’s platform gives short sellers an edge in navigating these volatile market conditions, with real-time data on short interest and float metrics and their industry-leading locates system that helps traders secure hard-to-borrow shares at competitive rates. Their advanced order routing ensures optimal execution even during intense short squeezes.
MARA Holdings (NASDAQ: MARA)
As one of the largest Bitcoin mining companies, MARA stock’s short interest hovers at 20%. The company has a $6.8 billion market cap and a high price-to-earnings (P/E) ratio of 39. MARA stock dropped 25% over the last month to a current price of $19.95 per share.
According to S&P Global Market Intelligence, MARA short selling activity has been high. This is somewhat expected given the price volatility of Bitcoin itself. Namely, when BTC price reaches new highs even long-term holders awaken from slumber and erect a sell wall.
So far, the market has primarily absorbed it, but with even higher BTC highs, this may not be the case. In turn, short sellers speculate that MARA is overextending. As of early December, MARA accumulated 40,435 BTC, buoyed by $1.1 billion of Bitcoin acquisition via convertible notes.
In other words, MARA is taking a cue from the MicroStrategy playbook, but MicroStrategy doesn’t have high operating costs to consider as MARA does. This is the central driver for MARA’s short-selling activity, as more price volatility is expected in 2025.
WSJ currently views MARA shares as overweight, with a median price target of $27.50 vs the present $19.95 per share. The bottom price target of $23 is also above the current price level.
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Symbotic Inc. (NASDAQ: SYM)
In April’s coverage of Symbotic, the AI-powered automation and logistics company’s stock was priced at $44.78 per share. At that time, it was considered discounted. However, SYM stock dropped to a yearly bottom of $17 in September, only to rally near $40 again in November.
Now priced at $25.20 per share, nearly 40% of SYM float is shorted. The fluctuation in SYM stock is mirrored by its contentious valuation. So much so that a securities class action lawsuit has been filed related to Symbotic’s purportedly misleading financial reporting.
At the end of November, the company delayed its Form 10-K filing for FY24. Most recently, on December 12th, Symbotic acquired OhmniLabs for its machine vision and mobile robot solutions for warehouses.
Suffice it to say that this confluence of events, both bullish and bearish, has made a fertile ground for speculation. However, if the incoming Trump admin focuses on modernizing supply chains while cutting red tape and taxes and also revitalizing domestic manufacturing, Symbotic could see a repeat of 2023 stock boost to over $50 per share.
C3.ai (NASDAQ: AI)
C3.ai is another case of traders betting on the AI overplay. In June’s C3.ai coverage, AI stock reached the $27 range, now priced at $35.82. AI’s yearly peak happened last Monday, reaching $42.94 per share. Year-to-date, AI shares are up 24%.
As noted previously, the investing thesis for C3.ai revolves around the modular development of AI apps for enterprises. The company maintains these tailor-made apps, having adopted a consumption-based pricing model in 2022 as a way to build on top of subscriptions.
Ending October, C3 reported a 29% revenue increase year-over-year to $94.3 million. Subscriptions are still strong, making up 86% of revenue and having increased by 22% yoy. Nonetheless, C3 is still reporting quarterly net losses, with the latest at $65.97 million.
Although the company has a $730.4 million cash balance to burn through, the lack of profitability drives short selling. 19% of AI stock’s float is shorted, as recorded at the end of November.
WSJ’s rating puts AI stock on hold, giving it a median price target of $36.15, aligned with the present price level.
Where is your investing strategy on a risk spectrum between memecoins and dividend aristocrats? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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