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Short Report: Bears build positions in The Gap ahead of earnings
The Fly

Short Report: Bears build positions in The Gap ahead of earnings

Bears nibble on The Gap shares ahead of earnings, building short positions despite steep losses over past three months

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 1.6%, the Russell 2000 index was up 2.3%, the Russell 2000 Growth ETF (IWO) was up 2.1%, and the Russell 2000 Value ETF (IWN) was up 2.7% in the five-day trading session range.

SHORT INTEREST GAINERS

  • Estimated short interest in The Gap (GPS) peaked in early April of this year around 21% and then pulled back below 15% for much of the past month. This week however, shorts as a percentage of free float were up by over a percentage point to 15.9% – a one-month high. The company is set to release its Q1 results on Thursday, May 25, and investors may be bracing for another disappointing event. Wider than expected earnings loss reported in early March drove a 6% decline in the stock and precipitated a deeper slide in the coming weeks, with Gap shares losing about half of their value since the stock peaked in early February. In the five day period covered, Gap was also down 1.5% through Thursday, with another 4% decline coming on Friday in spite of the upgrade from Citi to Neutral calling out an overly negative sentiment on shares.
  • Ortex-reported short interest on Stitch Fix (SFIX) retreated below the 20% level on April 12 and remained below that threshold for five consecutive weeks, even as the stock declined by about 40%. Shares are finding some support over the past two weeks however, and the elevated bearish positioning is re-emerging. As a percentage of free float, short interest on Stitch Fix was up over four percentage points this week to a three-month high of 23.6% and days to cover on the name reached a three-year high of 4.7. In the five-day period covered this week, the stock was down a modest 2.2%. The company will likely be reporting its Q3 results in early June.
  • Estimated short interest on gene therapy biotech bluebird bio (BLUE) rose from 23.8% to 26.4% this week after a month-long slumber below 25%. This marks the highest level in bearish bets on the name since late December of 2022. The company delivered a positive surprise with its Q1 results early last week as revenue from its Skysona product used in the treatment of adrenoleukodystropy drove an earnings beat instead of expected loss. The stock bounced over 12% after the results, though those gains have since been reverse. In the five-day period covered through Thursday, bluebird bio was down 20% this week.

SHORT INTEREST DECLINERS

  • Estimated short interest in Upstart (UPST) peaked around 37% on May 8 just before the company delivered a much smaller than expected earnings loss, driving the stock higher by about 34%. Upstart shares sustained and built on their as bears pared their exposure. Short interest as a percentage of free float was down this week from 34.2% to a one-year low of 29.7% while days to cover was down 100 basis points to 4.3. Upstart shares were up 46% in the five-day period covered through Thursday and have now doubled since the company’s pre-earnings’ lows.
  • Ortex-reported short interest in Chewy (CHWY) hit a four-month high of 26.3% early last week but has since receded all the way down to 21.4% – a nine-month low. The stock was down 3.7% in the five-day period through Thursday, with another 6.3% decline coming on Friday. Volumes were light and there was no news catalyst for the retreat, though the company is on tap to report Q1 results on May 31.

Keywords: Short selling, short interest, days to cover, securities, lending, utilization, sentiment analysis, Stitch Fix, Bluebird bio, The Gap, Upstart, Chewy

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