Polished.com (POL) stock price made a major move on Wednesday for apparently no reason. The shares surged by more than 600%, lifting it to a high of $10.90, its highest point since August 4th. At its highest point, the stock was up by more than 890% from its lowest point this year.
Short-squeeze fadesIt was not clear why the Polished stock price jumped sharply on Wednesday. In a statement, the company said that it had not filed any report with the SEC that triggered the surge. This explains why the stock dropped by more than 40% in the pre-market session on Thursday.
The most likely reason why the shares jumped was that it was just a short-squeeze. According to SeekingAlpha, the company is heavily shorted with a short-interest of over 11%. It is also a thinly-traded company with an average volume of 2.16 million.
On Thurday, data by Yahoo Finance shows that it had a volume of over 128.5 million shares, which is a good sign that this was just a short-squeeze.
These squeezes, which became popular in 2021, will likely continue growing in the coming months as investors position themselves for a lower interest rates environment. In its monetary policy decision this month, the Fed pointed to three rate cuts in 2024. Other central banks like the BoE, ECB, and SNB are also expected to cut rates.
Polished.com’s fundamentals are not all that good, which explains why the stock has been in a freefall this year. In its most recent results, the company said that its revenue came in at $77.8 million, down from over $143.6 million in the same quarter in 2022.
The company also continued its loss-making trend as the net loss jumped to $6.6 million compared to $5.2 million in the same quarter in 2022. Therefore, there are concerns about whether the company will survive now tht its balance sheet has weakened.
Its total cash and short-term investments came in at $9.8 million, down from $25 million in the March quarter. It also has over $85 million in long-term debt and $36.5 million in accrued expenses.
Is Polished stock a good buy?
Polished.com stock is an extremely risky one, as we saw with the other meme companies in 2021. Most of them have since lost their shine while Bed Bath & Beyond and Virgin Orbit have gone bankrupt.
Polished.com faces many headwinds, including its decelerating revenue growth, substantial losses, and a highly leveraged balance sheet. This means that the company could struggle to execute a turnaround now that interest rates are still high.
Therefore, the outlook for POL stock is still bearish, with the next point to watch being at $5. It could also regain its penny stock status by moving below $5 soon. The only risk for shorting the company is that it could go through a short squeeze again.
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