Stem (STEM) shares rallied more than 25% on Monday as investors ran into the AI-driven clean energy solutions company amid growing speculation of a short squeeze.
With a short interest exceeding 18% of the float, a continued rally in STEM shares in recent weeks has caught many bearish investors off guard, forcing some to cover positions, further adding fuel to the upside.
Including today’s surge, Stem stock is up over 200% versus its low set in the final week of June.
Why Stem Stock May Be Worth Buying Here
Despite an explosive move to the upside over the past four weeks, STEM stock may still be worth owning as the short squeeze could escalate further in the days ahead.
The Houston-headquartered firm currently has more than 18% of its float sold.
Therefore, any sustained upward momentum could force short sellers to buy back shares, driving prices even higher from current levels.
Moreover, the recent rally has pushed Stem shares well above all of their major moving averages, presenting somewhat of a compelling technical case to own them as well.
Here’s the Case Against Owning STEM Shares
For serious, long-term investors, however, STEM shares remain a high-risk proposition given the company’s fundamentals remain rather thin.
The NYSE-listed firm continues to record significant losses, with over $800 million reported as of December 2024.
Moreover, the recent reverse stock split and dilution through convertible notes raise concerns about shareholder value as well.
Stem stock investors should, therefore, practice caution as short squeezes, while often lucrative, tend to be short-lived as they’re driven by emotion, not fundamentals. Therefore, once the hype fades, STEM stock could retrace just as quickly, leaving late buyers exposed to steep losses.
How Wall Street Recommends Playing Stem
Investors should prefer staying on the sidelines in STEM shares amidst the ongoing short squeeze also because Wall Street doesn’t currently view them favorably for the back half of 2025.
According to Barchart, the consensus rating on Stem stock currently sits at “Hold” only with the mean target of about $11 indicating potential downside of roughly 40% from here.
