Earlier this year, I called out three stocks as potential short-squeeze opportunities. Among these picks, Carvana (NYSE:CVNA) and Upstart (NASDAQ:UPST) have delivered multi-bagger gains since. The third stock, Luminar Technologies (NASDAQ:LAZR), hasn’t been as impressive. However, it’s still up 7% since that piece.
Will I be able to repeat these gains? It’s getting increasingly difficult to tell. That’s because businesses have started stabilizing their balance sheets, and fewer stocks in the market are being heavily shorted, due in part to these recent rallies.
That said, there is still plenty of opportunity for short squeeze speculators. I will be listing the best options that have caught my eye recently. However, I do think it’s worth noting that these are only plays for those with “funny money” to pursue. Given the potential downside risk these stocks provide, it’s also possible that investors could lose their shirts by diving in.
With that said, let’s dive into why these three short-squeeze stocks have big upside potential.
Bank of Hawaii (BOH)
The mini-banking crisis we saw earlier this year hit Bank of Hawaii (NYSE:BOH) hard. However, BOH stock has bounced back strongly of late.
While it may take a while to fully recover, BOH stock clearly has big upside potential, even from today’s price. This is also a stock with some major short squeeze potential, given the fact that 22% of its shares are being sold short, at the time of writing. That’s a crazy high level for a profitable company paying a 5% dividend.
Notably, Bank of Hawaii also has a very loyal customer base in Hawaii, where it has ~34% of deposits. Additionally, the lender faces less competition in other Pacific islands like Guam. Tourism and military demand should improve as COVID fades. These are all fundamental factors that point in the company’s favor.
Now, Bank of Hawaii’s balance sheet isn’t perfect. But unless there’s an economic disaster that coincides with a lack of help from the Federal Reserve, I don’t see BOH failing. Its 7.1% Tier 1 leverage ratio and 13.24% capital ratio mean it can handle significant loan losses. Non-performing assets are currently low at 0.09%, and allowance for credit losses to total loans and leases outstanding was 1.04% at the end of Q1.
In short, BOH stock is a good buy for investors seeking income and growth at a valuation of only 11-times earnings. The company’s additional value as a short squeeze opportunity is just the cherry on top.
DISH Network (DISH)
There’s been tons of buzz around DISH Network (NASDAQ:DISH) recently. Rumors are swirling about Amazon (NASDAQ:AMZN) partnerships and an EchoStar (NASDAQ:SATS) merger, driving a nice rebound in DISH stock. But some doubt DISH can compete on its own, and doubt the Amazon deal will materialize.
I think the Amazon deal could boost sales by $2 billion plus in a year. Reports say Amazon wants to use DISH’s spectrum for cloud services and devices like Alexa. This gives DISH a steady revenue stream to fund its 5G buildout.
Reuniting with EchoStar also makes sense. That’s because this deal would combine the two companies’ satellite TV, broadband, and wireless businesses, while also cutting DISH’s debt.
Yes, DISH is losing satellite TV subscribers due to competition and cord-cutting. But DISH can grow its Sling TV streaming service to offset this trend.
Overall, DISH seems undervalued around $8 per share and a $4 billion market cap. That’s less than half the valuation of its spectrum holdings of $10 billion.
Luminar Technologies (LAZR)
Luminar Technologies is the undisputed leader in LiDAR technology for autonomous vehicles. This laser-based sensing technology allows self-driving cars to precisely see and understand their surroundings, enabling genuine autonomy. While LiDAR is superior to radar and cameras, its high costs have hampered adoption. This has weighed on LAZR stock, which has plunged over 80% from its peak.
However, I think Luminar is poised for a breakout as LiDAR costs rapidly decline. The company has guided for triple-digit revenue growth through 2027 as production scales. Partnerships with automakers like Volvo (OTCMKTS:VLVLY), Daimler (OTCMKTS:DDAIF), and Hyundai validate the company’s technology and fuel my optimism around this company’s upside. Luminar Technologies also expects to reach positive gross margin by Q4 2023, proving it’s becoming much more financially disciplined.
Certainly, LiDAR technology is likely to retain a price premium over radar, at least right now. But we’ve already seen massive cost reductions across the sector, and this trend will likely continue. Accordingly, I think the performance advantages LiDAR provides over radar and cameras make it the dominant choice for automakers globally. As the industry leader in this sector, LAZR stock should ride this growth wave higher.
Currently, LAZR stock does trade at a rich valuation, but I believe this valuation is justified by the enormous TAM for LiDAR technology overall, as well as Luminar’s first-mover advantage. The company is solidly capitalized, guiding to end the year with $300 million available to fund growth.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.