Short Sellers Target Crowdstrike

Crowdstrike Holdings Inc CRWD has been a volatile but strong performer in 2020, gaining 125.2% year to date. One of the drivers of Crowdstrike’s volatility in recent months has been short-selling activity, and S3 Partners analyst Ihor Dusaniwsky recently said short sellers are piling back into the stock in recent weeks.

Crowdstrike currently has $1.09 billion in short interest, about 6.6% of the stock’s float. However, that short interest is up 85% year to date and has increased by $120.1 million in the past 30 days alone, according to S3. Dusaniwsky said short-selling activity has accelerated as Crowdstrike’s stock has rallied 15.2% in the past two weeks.

It’s been a tough year for Crowdstrike short sellers up to this point. Dusaniwsky said they have generated a net loss of $376 million year to date. Crowdstrike short sellers have fared a bit better in the month of August, however, logging an $8.2 million profit so far.

Short Squeeze Potential: Dusaniwsky said there's no imminent threat of a short squeeze for Crowdstrike, but the stock’s previous trading action back in July demonstrates it has all the ingredients for a short-term squeeze.

“We see continued short selling in CRWD as its stock price remains at or below the $115 price range, but it remains a strong short squeeze candidate if the stock price rallies higher,” Dusaniwsky said.

Software systems peer VMware, Inc. VMW also has $1.09 billion in short interest, about 10.1% of its float. VMware’s short interest jumped by $130.7 million in the past 30 days.

Benzinga’s Take: Frome a purely technical standpoint, Crowdstrike has been trading mostly sideways between around $95 and $116 since June. Traders should take note of any potential break-outs from that range in either direction as they could potentially trigger a wave of fresh short selling or short covering.

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