RENT - Is a Giant Short Squeeze Brewing in Rent the Runway (RENT) Stock?

2023-09-13 14:15:24 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

There are plenty of examples of hard-hit stocks that went public during the peak of market mania in 2021 and have since fallen to more earthly levels. Rent the Runway (NASDAQ: RENT ) is one such company. Shares touched as high as $19 back in late 2021, before falling all the way to an all-time low of 86 cents this past week. That’s good for a decline of more than 95% in RENT stock, making the company among the more beaten-down names in the consumer discretionary space.

At these rock-bottom levels — (Rent the Runway now has a market capitalization of just over $60 million) — one has to think about the potential value this stock carries as a rebound play. At these levels, the company’s stock price is factoring in a high likelihood of bankruptcy. If the company is able to grow its way out of this hole and meet what many view as strong consumer demand , however, then perhaps this binary bet could work out in favor of investors.

Retail traders are also pointing to the sky-high short interest data on RENT stock. According to data from Fintel, which isn’t a complete picture of the overall market, around 16% of the company’s stock is sold short. Thus, there’s a clear short squeeze narrative brewing with this name.

Let’s dive into what investors should make of Rent the Runway at these levels.

Is RENT Stock a Potential Short Squeeze Opportunity?

Many consumer discretionary stocks are still holding on strong. Consumer demand remains robust, employment data is strong and inflation is coming down. These sorts of metrics should be good for a company like Rent the Runway.

Unfortunately, the opposite has been true and short sellers have profited from the firm’s demise. The high level of short interest shown in this stock indicates that many big-time investors are taking the short side of the trade on RENT stock.

For retail investors, this could be a salivating opportunity, or at least one to put on the radar. Given the company’s newfound sub-$1 per share price, its high short interest and relatively limited float, RENT could see some volatility on the horizon. And while volatility isn’t the friend of many conservative long-term investor types, for traders, that’s the kind of environment one can thrive in.

We’ll have to see how shares of Rent the Runway perform from here. Personally, it’s one I’ve now put on my watch list and aim to provide updates on as the situation evolves.

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On the date of publication, Chris MacDonald did not hold (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 .

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