TOP Ships Inc (NASDAQ: TOPS) hasn’t seen much movement in the market this morning, but if I had to bet on where the next big short squeeze would be found, it would be here. Today, we’ll talk about:
- Why I believe that TOPS is headed for a short squeeze;
- why it’s a good stock to trade but not necessarily to invest in;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Why I Believe That TOPS Is Headed For A Short Squeeze
Before we get into why I believe that TOP Ships is going to be the next big short squeeze, it’s important that you understand what a short squeeze is. Essentially, short traders are making bets that the stock will fall. However, when news pushes the stock upward, shorts start to lose money, causing them to be “squeezed” out of their positions and sending the stock soaring. I believe that this will be the case for TOPS relatively soon. Here’s why:
First off, let’s start with short interest. After all, a key part of the recipe for a short squeeze is high short interest. As of November 26, 2018, short interest made up about 46.4% of the float. That’s a massive amount of short interest, and should the stock tick up in any meaningful way, these shorts will likely start to abandon.
Another factor in a short squeeze is news. After all, news moves the market and for a short squeeze to happen, the stock must tick up. Here are some positive hit points that I’m sure investors are starting to pay attention to:
- EPS growth wwas 99.92% year over year on the previous earnings report.
- Revenue growth was 38.44% year over year.
- The company recently signed a time charter agreement with BP.
- TOPS also announced a 3 year time charter agreement with Clearlake recently.
Considering the positive news as of late, the stock has ticked up slightly, but has yet to see the big bang that led to a short squeeze. As a result of the high short interest and recent positive news, I believe that this big bang will come soon.
Why This May Not Be A Good Long-Run Investment
In the short run, I believe that TOPS will see some strong gains. However, in the long run, I wouldn’t touch this stock with a 10 foot pole. At the end of the day, the company, like many other Greek shipping companies, has a history of death spiral financing and other moves that were not in the best interest of investors. While things have changed thus far, the company is still struggling financially and could be headed for more bad news when it comes to offerings in the long run. Nonetheless, in the short run, I believe that the potential short squeeze does represent an opportunity.
What We’re Seeing From The Stock
After gaining more than 5% in the market yesterday, gains on TOPS are tapering off as the stock bounces down. Nonetheless, support seems to be just $0.01 away, and when it hits, the stock could run. As is normally the case, our partners at Trade Ideas were the first to alert us to today’s declines. At the moment (8:39), TOPS is trading at $1.12 per share after a loss of $0.03 per share or 2.61% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on TOPS. In particular, we’re interested in following the stock to see if our predictions with regard to the coming short squeeze are correct. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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