Introduction
Based on the characteristics identified in my article “Most shorted ASX Stocks 5/2/25” the following stocks look like they could be in the early stages of a shift in sentiment in the eyes of the short sellers. That could potentially signal price further price declines are to come.
Stock #1: Polynovo ASX:PNV
2025 estimated PER: 196.5 | Debt: Minimal | Cash: $46M | Operating Cash Flows: Just recently positive
Clearly the biggest concern for holders of this stock is the valuation. There is plenty of room for the stock to move lower and for the stock to still look expensive. As we’ve seen in the previous article, short-sellers like a big runway for the stock to potentially fall and they certainly have that with PNV.
Stock #2 Zip Co ASX:ZIP
2025 estimated PER: 77.7 | Debt: $2.4B | Cash: $125M | Operating Cash Flows: Just recently positive
Again there is plenty of valuation downside for ZIP. Unlike PNV, they also have an enormous debt balance. Growth in Australia was negative when they last reported while they continue to do well in the US. On a per share basis though, revenue growth has been slowing. As we saw in the previous article. the short sellers love highly valued stocks that are showing a slowing in growth. ZIP fits that criteria. Another concern is the recent 100% sell-down by founder Larry Diamond.
Stock #3 Lovisa ASX:LOV
2025 estimated PER: 29.3 | Debt: $359M | Cash: $35M | Operating Cash Flows: Very comfortable
This stock looks the least vulnerable on a fundamental basis. Valuation is high but acceptible considering the rate at this company has been growing since 2020 especially. Nevertheless, the short sellers are seeing something that has got them excited. I have seen some headlines suggesting there are some new competitors entering Lovisa’s market. If they were to take market share and reduce the growth rates of Lovisa, then a 30 PER will be much harder to justify.
Stock #4 Neuren Pharmaceuticals ASX:NEU
2025 estimated PER: 25.8 | Debt: None | Cash: $213M | Operating Cash Flows: Comfortable
The stock already has a lot of downward price momentum having fallen 42% in the past 12 months. While the short sellers have ridden the stock lower, increasing their positions along the way, they are still below 5%.While NEU has a great deal of potential, it also has its risks. The new administration in America and in particularly the new Health Minister add to the uncertainties. Drugs in development are great if they come-off but there’s always a chance they don’t. Sales of the their primary drug have been steadily increasing but there are other drugs being developed in the same field. The short sellers are showing no signs of going away yet.
Stock #5 Whitehaven Coal ASX:WHC
2025 estimated PER: 7.4 | Debt: $1.8B | Cash: $405M | Operating Cash Flows: Declining
Easy to look at WHC and think “surely they can’t go any lower”. That is until you realise they were actually loss-making in 2021 and pretty much had a break-even year in 2020. From 2012 to 2016 they flipped between small profits and small losses. $1.8B in debt is nothing to take lightly either. Add to that the fact that the coal price is in a well defined downtrend and it’s not hard to see why the short-sellers are increasing their bets against this company.
Coal Price
Conclusion: 5 Stocks with Rising Short Interest
While each of these stocks presents a unique set of risks and challenges, the common thread among them is their appeal to short sellers due to high valuations, slowing growth, or broader industry uncertainties. Polynovo and Zip Co stand out for their significant valuation risks, with ZIP further burdened by substantial debt and declining growth metrics. Lovisa appears more fundamentally resilient, but emerging competition may be fueling short interest. Neuren Pharmaceuticals carries the inherent risks of biotech investing, with regulatory uncertainties adding to short-seller concerns. Meanwhile, Whitehaven Coal’s declining cash flows and a weak commodity price environment make it a compelling target for bearish traders.
While short interest alone is not a definitive predictor of future price movements, it often signals underlying concerns that should not be ignored. Investors should carefully assess these factors and consider whether the risks highlighted by short sellers align with their own investment thesis.
Disclaimer: This information is provided purely for educational purposes. It takes no account of an individual’s personal financial circumstances and hence can in no way constitute financial advice. The above data may be subject to errors or inconsistencies for which the author takes no liability. It is imperative that all investors do their own research or if they need advice, seek it from a qualified financial adviser.
5 Stocks with Rising Short Interest