Charter Communications Facing Potential Short Squeeze

Investing.com reports that Charter Communications (NASDAQ:CHTR) might experience a short squeeze following its upcoming earnings report, due to high short interest and significant squeeze risk, based on S3 Partners' analysis.

According to the firm, over 10% of Charter's shares are shorted, positioning the stock uniquely in the S&P 500, where only 63% of shares are free-floating. This situation could yield gains if earnings surprise positively.

The short position in Charter has been stable since it expanded in February, when the stock lost nearly a third of its value, despite fluctuations in price, as mentioned by S3.

Charter's “crowded score,” which indicates short interest volume, is nearing 70, a high level that elevates the squeeze risk indicator. S3 noted that this score peaked at 100 during a stock rally in June and July, indicating prior short squeeze events.

S3 identified a historical pattern of “negative sensitivity to earnings” for Charter, where stock price and short position both shift negatively in relation to earnings.

Despite this trend, analysts believe the stock’s negative short position and return are bullish signs, as the stock typically reverts back positively.

Positive earnings could elevate Charter’s squeeze score, potentially compelling short sellers to cover their positions if the stock rallies.

Charter has recently seen price movements fluctuating up to 16% around earnings announcements, adding more risk for short sellers.

In conclusion, S3 suggests that any significant upward price movement could trigger a spike in the squeeze score, indicating a potential short squeeze.