Wall Street analysts remain confused as volatile trading centered around a few stocks took place on Friday and Monday.
Fundamental analysis: “WallStreetBets” wreak havoc in stocks
It seems that Reddit’s subforum “WallStreetBets” has facilitated extremely high volatility in certain stocks. This space is used by retail investors to discuss investments and promote certain stocks.
“What we are seeing is an interesting clash between retail investors and the big institutions,” said Delano Saporu, founder of New Street Advisors Group. “The cheerleading and strong emotions from both sides is creating an environment of emotion-based investing.”
They intentionally picked stocks that are attracting huge selling interest, in order to create the so-called “short squeeze”. This process takes place when the demand outweighs supply as sellers are covering their positions and exiting the market.
“Generally speaking, stocks with high short interest have been some of the top performers this year,” analysts at Bespoke Investment Group wrote in a note.
As a result, it seems that short-sellers have lost billions in a matter of days as they were forced to liquidate their positions. According to a report, short-sellers lows around $3.3 billion this year, with almost half of this amount taking place on Friday.
Bed Bath & Beyond downgraded
Bed Bath & Beyond (NASDAQ: BBBY) stock price is trading in an extremely volatile manner in the past few days. Shares are up about 80% this year with analysts confused given that there are no new fundamental catalysts. As a result, the stock received two downgrades today as valuation is no longer attractive.
UBS analyst Michael Lasser moved to downgrade the stock to “Sell”.
