The Shorts Get Cautious And Investors Reap The Rewards
The rise of crowd-sourced short-squeeze activity has short-sellers cautious if not running scared. The potential for losses is great in the high-stakes game of financial cat-and-mouse and smart-money doesn’t like to get burned when it can do something to prevent it. That has short-interest in highly-shorted names on the decline but still ripe for a squeeze. In our never-ending quest to find the best opportunities the market has to offer, we’ve uncovered two names that fit this bill. Not only is there high short-interest to fuel a sharp rally in prices but the two are outperforming expectations and set up for a rebound.
Dish Network Still Slugging It Out In The Fight For TV Viewership
DISH Network (NASDAQ:DISH) has been long-been on the losing side in the battle for TV viewership but the stock appears to have hit bottom in 2020. The company is still shedding viewers but rising prices have the company growing as it competes with other satellite and cable operators. The Q4 results show that not only is the revenue growing but the contraction of the company’s business is slowing which could foreshadow stabilization in the year ahead.
The topline 44.56 billion is up 41% from last year and beat the consensus by a slim margin despite a slightly greater than expected number of cancelations. The net subscriber number fell by more than expected but is up 30% from the previous year and sign of slower subscriber loss if nothing else. For the full year, the total subscriber loss is about 5.8% with an obvious slow-down in the back half of the year due to the pandemic. Because the trends in home media and entertainment consumption are expected to stick this company could easily see the business contraction stabilize in the first half of 2021.
As for the short-interest, the number of sales sold short is running at nearly 17%. At this level rising bullish interest in the stock could easily trigger a squeeze and the technicals are favorable. The recent price action has DISH putting in a bottom at the mid-point of its post-COVID trading range and edging higher. The price action is facing resistance at the baseline of what looks like a double-bottom reversal with bullish indicators. The indicators aren’t strong yet but support the idea of rising prices in the near-term. The question that needs to be answered is at what price the bears begin to get nervous and we think it is very close to the current price action.
DISH Stock Chart
Discovery Inc Goes Streaming
Long a staple of the cable tv and satellite networks Discovery (NASDAQ:DISCA) is going digital. The company launched its streaming services not too long ago and is already pushing 12 million subscribers. Better, the company is producing top-line growth not driven by mere price increases and that growth appears to be sustainable. While Discovery Inc.’s short-interest is a less-compelling 10% the outlook for business is better. In our opinion that raises the odds of a short-squeeze tremendously.
Based on the surge in streaming use across all brands it is likely that Discovery will see continued momentum in that channel. With that in mind, the 10% YOY increase expected for 2021 is likely to be too low and the first evidence is already in. If the shorts aren’t already covering their positions they are likely going to start soon. Looking at the charts, this stock is in a strong uptrend and one that is only gaining momentum with every earnings release, not stock that we want to short. With share prices up another 8.0% and well above any kind of resistance, the shorts are certainly feeling some pain right now.
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