3 Shorted Stocks on the Brink: Are These Names About to Unwind?

Key Points

• Short sellers may have bet the wrong way with these three stocks, as their short interest is now high enough to cause a potential short squeeze.
• Wall Street analysts and institutional buyers agree that these stocks have a lot more upside.
• Based on fundamental and financial growth, recent price action might continue into 2025.

When investors look for the best opportunities in the stock market, one gauge they often look at is whether people (retail and professionals) are buying a stock. However, not many know that the same strategy can be flipped on its head, and it works better than focusing on only the buying side of the equation.

By finding stocks that are being oversold, particularly with high short interest, investors can tap into opportunities that carry a short squeeze potential. A short squeeze happens when a stock that has been too heavily shorted runs higher in price, which then forces the short sellers to cover (close) their positions, which involves buying back the stock. Of course, this buying activity creates even more upward pressure on a stock’s price.

This is why today’s list of stocks with high short interest can come in handy for investors in the coming months, especially as all three of these names have demonstrated bullish price action to place pressure on the bearish sellers. Names like Reddit Inc. NYSE: RDDT, SoFi Technologies Inc. NASDAQ: SOFI, and even CAVA Group Inc. NYSE: CAVA fit this criteria to offer new potential upside in 2025.

Reddit Stock: Not the New Name on the Block Anymore

While the start of this new social media platform had been slow at first, without much recognition from the marketplace, investors found out pretty quickly that all of this company’s key performance indicators (KPIs) were pushing on the verge of a new compounding stock.

As of the most recent quarterly results, Reddit showcases a net 97.2 million daily active users, up by as much as 47% compared to the same quarter last year. This is a measure that both investors and Wall Street analysts look at closely in the technology sector, so Reddit is off to a great start.

It shouldn’t come as a surprise to see Reddit’s quarterly revenue reach $348.4 million, a jump of over 68% over the year. What is a surprise, however, is to see that up to 15.6% of the company’s shares are held in short positions, which is high in relative terms.

As the stock delivered a net rally of up to 173% since its IPO earlier in 2025, these short sellers might be feeling the pressure now, meaning that their positions could soon be forced out and create a new bull run in Reddit stock.

Bottoming Mortgage Markets, Good for SoFi Stock

SoFi stock is another name with a dangerously high level of short interest, making up as much as 12.8% of the company’s share float to create another potential short squeeze scenario under the right conditions. With this in mind, investors should see the 76.3% annual performance in the stock as a benchmark, especially because of the following.

The mortgage market index is now at a 1996 low, meaning that SoFi stock nearly doubled its price during a year when mortgage financing wasn’t that hot. Now that the Federal Reserve (the Fed) is starting to cut interest rates, the best year for SoFi stock might be around the corner.

This is because as interest rates come down, so do mortgage rates. Despite how high home prices might be today, more accessible financing rates will spark the housing market for some would-be homebuyers sitting on the sidelines. Knowing this, an institutional buyer in the market decided to act ahead of the curb.

Those from State Street boosted their SoFi stock holdings by as much as 1.7% as of November 2024, bringing their net position to a high of $142 million, or 1.7% ownership in the company. Short sellers had better watch out because a new bull run might be underway for SoFi stock.

CAVA Bulls Were Right

A few talking heads and investors in the market started calling CAVA the new Chipotle Mexican Grill Inc. NYSE: CMG, and while this prediction seemed a little too bold in CAVA’s early days, it is now looking more like the company's reality.

According to CAVA’s latest quarterly results, revenue grew to $241.5 million, an impressive 39% growth rate over the past year. Then, same-restaurant sales growth pushed an unmatched 18.1%, so this company has definitely started its growth spur stage, while Chipotle is in its ex-growth era.

This doesn’t mean good or bad news for investors in these names, as they are both great companies to own. However, it does mean bad news for the bears, who have accumulated up to 10.4% of CAVA’s stock in short positions.

Double-digit growth across the board and a consensus price target of $143.8 a share, indicating up to 25% upside from today’s prices, present significant hurdles for short sellers.