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3 High Short-Interest Stocks Poised for a Rate Cut Squeeze

Cartons with KOHLS logo in shopping trolley near laptop. Editorial online store order related 3D rendering

Key Points

  • Three stocks report high short interest ahead of the Federal Reserve rate cuts; a potential rally could trigger short squeezes.
  • Backed by fundamental tailwinds and financial strength, these names could see massive upward momentum in the coming quarters.
  • Wall Street analysts want double-digit EPS growth and upside through price targets and projections.
  • 5 stocks we like better than Occidental Petroleum.

When stocks accumulate a significant short interest, it typically creates the risk of a short squeeze. When investors sell a stock short, they have to borrow and sell it to profit from their bearish views. However, closing the position involves buying back the stock. Knowing this, investors can probably guess what happens when short sellers need to close their positions all at once.

The value of the underlying stock might tick a bit higher on good news or developments, triggering short sellers to get out of their positions. This results in massive buying pressure and gets the stock into a virtuous cycle of upward price action. Because the Federal Reserve (the Fed) might start to cut interest rates in the following weeks, a particular group of stocks could see higher prices, and their high short interests could trigger a short squeeze.

This list includes a mix of different industries. Kohl's Co. NYSE: KSS is among the retail stocks offering a more affordable alternative to inflation-choked consumers, riding on the tailwinds found in off-price names today. Investors can also get behind Buffett's new bullish oil view through Chesapeake Energy Co. NASDAQ: CHK. A healthy mix of the real estate sector and technology names drives SoFi Technologies Inc. NASDAQ: SOFI into this list, riding on cuts.

Kohl's Affordability Keeps Growth Prospects Strong Despite Inflation

Kohl's Today

Kohl's Co. stock logo
KSSKSS 90-day performance
Kohl's
$14.29 +0.12 (+0.85%)
(As of 05:45 PM ET)
52-Week Range
$13.77
$29.60
Dividend Yield
14.00%
P/E Ratio
6.44
Price Target
$17.22

Inflation and the rising cost of living in the United States have been concerns for everyday consumers, leading investors to avoid some of the retail names. These names typically don't fare so well during a volatile consumer environment.

Today, off-price names are starting to outperform not only through price action but also through financial strength.

Kohl's Stock Forecast Today

12-Month Stock Price Forecast:
$17.22
20.52% Upside
Reduce
Based on 10 Analyst Ratings
High Forecast$25.00
Average Forecast$17.22
Low Forecast$11.00
Kohl's Stock Forecast Details

Kohl's is part of this niche, and Wall Street analysts know how true this is, so they currently forecast up to 24.6% earnings per share (EPS) growth in the next 12 months for Kohl's stock.

Those at Telsey Advisory Group think this company could be worth up to $23 a share, implying investors could be set up for as much as 18.2% from where it trades today.

Despite the bullish evidence mounting for Kohl's, these analysts aren't the only ones willing to change their views.

The stock's short interest is as high as 37.2% of the overall float. Still, now that the stock is tagging onto the momentum found in peers like Target Co. NYSE: TGT and TJX Co. NYSE: TJX after an explosive earnings rally, Kohl's short-interest is flattening and looking to decline in the coming months at the risk of a short squeeze.

A Buffett-Backed Energy Cycle Could Drive Chesapeake Stock to New Highs

Chesapeake Energy Today

Chesapeake Energy Co. stock logo
CHKCHK 90-day performance
Chesapeake Energy
52-Week Range
$69.12
$93.58
Dividend Yield
2.82%
P/E Ratio
10.98
Price Target
$99.92

After a nine-day buying spree, Warren Buffett now owns up to 29% of Occidental Petroleum Co. NYSE: OXY, and his bet is, of course, tied to a bullish view on oil prices.

As interest rate cuts could be underway, oil demand could surge to justify higher prices ahead and prove Buffett’s pick another profitable idea.

However, there are other stocks that are higher up in the value chain, meaning they get paid first and so attract market attention first. One of these is Chesapeake Energy, which operates in the drilling equipment and exploration industry. It sees earnings growth long before production companies like Occidental Petroleum do.

Chesapeake Energy Stock Forecast Today

12-Month Stock Price Forecast:
$99.92
22.66% Upside
Moderate Buy
Based on 14 Analyst Ratings
High Forecast$118.00
Average Forecast$99.92
Low Forecast$83.00
Chesapeake Energy Stock Forecast Details

So why doesn’t Buffett buy more stocks like Chesapeake Energy? It’s because of size. Chesapeake has a market capitalization of only $9.8 billion, which is too small for Buffett’s buying power to even make a dent. This advantage for retail investors can be squeezed as Wall Street analysts also recognize the upside inherent in the company today.

The EPS growth forecast is set for up to 270.9% for the next 12 months, which is miles above the forecast of 30.8% for Occidental Petroleum. More than that, Stephens sees a price target as high as $118 a share for Chesapeake Energy stock, daring it to rally by as much as 61.1% from where it trades today.

Considering the stock's short interest is as high as 20.2% today, the upside potential today could trigger a short squeeze in this name.

Rising Mortgage and Real Estate Demand Could Trigger a Squeeze for SoFi Stock

SoFi Technologies Today

SoFi Technologies, Inc. stock logo
SOFISOFI 90-day performance
SoFi Technologies
$15.63 +0.28 (+1.82%)
(As of 05:45 PM ET)
52-Week Range
$6.01
$17.19
P/E Ratio
156.32
Price Target
$11.04

Lower interest rates also mean lower mortgage rates, which could help the thousands of would-be homebuyers sitting on the sidelines waiting for the right financial conditions to buy a home.

Considering that the Mortgage Market Index is now at a 1997 low, the bottom could soon be set by the Fed interest rate cuts.

SoFi Technologies Stock Forecast Today

12-Month Stock Price Forecast:
$11.04
-29.94% Downside
Hold
Based on 13 Analyst Ratings
High Forecast$16.00
Average Forecast$11.04
Low Forecast$3.00
SoFi Technologies Stock Forecast Details

Knowing that SoFi is in the eye of the storm for the potential rise in real estate and mortgage demand, Wall Street analysts now forecast as much as 150% EPS growth for the next 12 months, setting this company up for a potential short squeeze that the stock short-interest is as high as 17.9% of the float.

Needham & Company analysts now reiterate their “Buy” rating for SoFi stock, with a price target set at $10 a share. This implies a net upside of 35.1% from where the stock trades today.

However, these analysts weren’t the only ones on Wall Street willing to take on their bullish view for SoFi stock.

Dimensional Fund Advisors (SoFi’s second-largest shareholder) decided to increase its stake by 263.3% as of August 2024, bringing its net investment to $86.5 million today.

Should you invest $1,000 in Occidental Petroleum right now?

Before you consider Occidental Petroleum, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Occidental Petroleum wasn't on the list.

While Occidental Petroleum currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Kohl's (KSS)
4.2551 of 5 stars
$14.29+0.8%14.00%6.44Reduce$17.22
Chesapeake Energy (CHK)
3.1861 of 5 stars
$81.46flat2.82%10.98Moderate Buy$99.92
SoFi Technologies (SOFI)
2.1921 of 5 stars
$15.63+1.8%N/A156.32Hold$11.04
Target (TGT)
4.8406 of 5 stars
$131.92+0.3%3.40%13.99Hold$160.57
TJX Companies (TJX)
4.2729 of 5 stars
$121.77-0.2%1.23%28.65Moderate Buy$130.89
Occidental Petroleum (OXY)
4.7103 of 5 stars
$47.84+1.5%1.84%12.46Hold$62.10
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