Short Report: Bearish bets on C3.AI grow as analysts question valuation

Welcome to this week’s installment of “The Short Interest Report” – The Fly’s weekly recap of short interest trends among some of the most widely followed high-short-float stocks. Using the data from our partner Ortex.com, which utilizes the latest information from stock lenders to estimate short interest changes for thousands of publicly traded companies, this report will screen for some of biggest changes in short interest as a percentage of free float and days-to-cover ratios while also considering the short interest data on some of the more volatile and heavier-traded names of the week. Based on the availability of data from Ortex, the report tracks the trading period that covers prior Friday through Thursday of this week, excluding holidays. As a basis of comparison for stocks discussed below, the S&P 500 index was up 0.3%, the Russell 2000 index was down 2.2%, the Russell 2000 Growth ETF (IWO) was up 1.3%, and the Russell 2000 Value ETF (IWN) was up 2.3% in the five-day trading session range.

SHORT INTEREST GAINERS

• Ortex-reported short interest in C3.ai (AI) has broken out of its four-month-long range of 26%-35%, topping the high end of that band to reach 36.5% this week with a six-point jump – the highest level as a percentage of free float for bears in the name on record. The stock had more than doubled over the course of one month since the company’s May 15th positive revenue pre-announcement, though shares have come in by as much as 35% from the June 16th peak, and the debate on whether valuations have become too stretched by investors’ skyrocketing AI interest. This week, a research note from Oppenheimer echoed sentiment from DA Davidson last week, stating that while the company is in the right place at the right time, the risk-reward on the stock is neutral given the 200% run-up year-to-date. In the five-day period covered, C3.ai shares were down just over 4% despite the broader market rally.
• Estimated short interest on PetMed Express (PETS) slid to a three-month low of 22.5% late last week but bounced to a three-week high of 25.5% as of this Thursday. Trading volumes on the stock have been anemic for a couple of weeks now since the stock was booted from the S&P SmallCap 600, though bid-to-cover on the name remains near its 2023 lows of 1.7 however. Volatility in shares has also been low, with the stock up just 2.9% in the five-day period covered.
• Estimated short interest in The Children’s Place (PLCE) hit a one-month low of 27.2% late last week before bears rebuilt positions to 29.8% by Thursday. This is within a point of the 16-month high of 30.1% seen earlier this month. Shares of The Children’s Place have been on an upswing since the lows seen on June 1st when the company was removed from the S&P SmallCap 600, rising 58% just this month and about 4% in the five-day period through Thursday, though the stock is still down nearly 40% year-to-date.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in IGM Biosciences (IGMS) saw its highest level in 14 months just two weeks ago, reaching 48.3% of free float. This week however, some of the bearish positioning has been squared following the company’s spot secondary that was priced within a dollar of market, with estimated shorts reduced to as low as 19.5%. For the week, short interest ended down 15 points to just under 30%, while the stock slipped by just over 1% in the five-day period covered through Thursday.
• Estimated short interest in Rite Aid (RAD) has continued its decline from mid-May peak when it topped the 30% level, registering a steeper five percentage point move for the week to 20.5% just after hitting its six-month low of 18.6% on Wednesday. The company reported a smaller than expected Q1 earnings loss, and its interim CEO Elizabeth Burr cited “solid pharmacy margins” and “early progress with the company’s turnaround program”, even though the management also reduced the total company Adjusted EBITDA guidance by $10M to be $330M-$360M to reflect the recent business trends. Shares of Rite Aid were down another 23% in the five day period covered, as the company has now lost more than half of its value year-to-date.