Strong Earnings Numbers Ramp Up Pressure For Possible Lannett Short Squeeze

Shars of Lannett Company, Inc. LCI are up 7 percent on Thursday following Q4 earnings, revenue and 2017 guidance beats. A closer look at the stock’s short interest suggests there could be plenty upside ahead.

Lannett reported Q4 revenue of $170.9 million versus consensus estimates of $169 million. The company reported EPS of $0.92, topping expectations of $0.84. The company’s 2017 revenue guidance of $675-$685 million topped consensus expectations of $673 million.

You would never guess that Lannett had such a strong quarter based on the number of traders betting against the stock. In the past six months, Lannett’s short interest has spiked 57.5 percent as the stock’s share price has plummeted 28.9 percent. According to shortsqueeze.com, Lanett’s short percent of float is now an extremely high 42.5 percent. The stock currently has more than 11.7 million shares held short with 12.4 days to cover.

One of the most notable Lannett short sellers getting burned on Thursday is Citron Research’s Andrew Left. In January, Left said Lannett is headed for bankruptcy after the company was hit with multiple lawsuits related to drug pricing.

“Collusion on price hikes is beyond question,” Left said. “These lawsuits are better than a smoking gun: they are DNA evidence and nothing short of a confession.”

Until the lawsuits are resolved, quarterly earnings reports will be taking a backseat. However, if the lawsuits have a positive outcome for the company, the stock’s string financial numbers and massive short interest suggest a huge short squeeze could be in the works.