$SFT - Shift Technologies: undervalued stock with high short interest

Hey folks, 2021 is finally coming to an end and the market is looking very ripe! For the past few weeks, I’ve been doing research on various stocks, especially small-cap technology and consumer discretionary. A few include $CURI, $APPH, $REE, which all happen to go public via SPACs too! Many of these stocks have been hard hit by shorts through November and December. My goal was to find an undervalued stock that is consistently meeting its goals and has a long runway. I stumbled upon $SFT / Shift Technologies which ticked all the boxes. $SFT has been taking a beating ever since it went public but November and December were especially turbulent months. From about $7.50 at the start of November, it is now sitting at around $3 and I’m glad this has happened because I wouldn’t have discovered this stock otherwise. So let me breakdown why I’ve invested in $SFT for 2022. Financials In the investor presentation $SFT did with Insurance Acquisition Corporation back in July 2020, it set out to double its revenue from 2020 to 2021 and double it once again from 2021 to 2022. https://preview.redd.it/zfgmseycbq881.jpg?width=2000&format=pjpg&auto=webp&s=dc0444d79f83219f490fcbe513ff3522342a39bb As of now, it has already blown past this goal with Q4 remaining. https://preview.redd.it/irvf16webq881.png?width=613&format=png&auto=webp&s=2ad45802d7d08be8d40abfed0ec491c857028971 $SFT's current price-to-sales ratio is sitting at about 0.5. Over the past 4 quarters, the total revenue is about 520m where as the market cap of $SFT is 260m. peers like Carvana ($CVNA) and Carlotz ($LOTZ) have P/S ratios of 1.82 and 1.27 accordingly even after tanking for the past few months. Using an industry average of the P/S ratio, $SFT's price should at least be $7.50. Risks Back in 2020, skeptics said the investor presentation is too hopeful and Shift wouldn't be able to meet its revenue goals which it has since surpassed. Now, the same skeptics argue that this rapid revenue growth is short-lived and is only occurring due to the skyrocketing prices of used cars currently. They have been saying this since months ago but it just keeps getting higher. Shift has plenty of cars left in its inventory and is ready to ride the wave, I expect Q4 to be its first profitable quarter given these insane prices! https://preview.redd.it/e3udza2gbq881.png?width=769&format=png&auto=webp&s=fc62c4915b6c36e21b701887a488d3294b8bd938 Let me explain why it is easy for Shift to sustain this growth in the upcoming years even with a used car price crash! Shift is currently only in 4 STATES (California, Oregon, Texas and Washington). Shift is currently seeking inventory in Las Vegas. After some research, I found out that Shift will soon be entering Florida too (which will mark its entrance into the East Coast). It is currently hiring in Miami (https://boards.greenhouse.io/shift/jobs/5772993002). Once it hires for this role, my guess is that it will start seeking inventory in Florida too! With Las Vegas and Florida, it will only have entered 6 states. 44 more to go and plenty of money to be made 🚀 🚀 🚀 https://preview.redd.it/8sby8vahbq881.png?width=667&format=png&auto=webp&s=78ec06ae5ae90caab6a661b6ab77472aa8bb2e9b Short Interest Short interest has been steadily increasing over the past few months. It currently sits at about 30% of the float and keeps increasing steadily. I hope the shorts take their profits soon because they are about to be in trouble! https://preview.redd.it/irp0rutibq881.jpg?width=949&format=pjpg&auto=webp&s=cf8b4d08c0401eca1ed9bd9fff7355b1dba72320 Positions I've a few positions in $SFT, mainly in LEAPs. I expect rapid movement upwards once 2022 comes as the tax-loss selling will slow down. This coupled with the high short interest could could propel the stock to about $7.50. I currently have - 250 May 22 $5 calls bought at 0.35 each 250 Jan 23 $10 calls bought at 0.35 each I am also thinking about buying 500 Jan 22 $5 calls for 0.05 each given today's massive rise! Disclaimer: I am not a financial advisor... do your own due diligence.

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$SFT - Shift Technologies: undervalued stock with high short interest

bullish

Hey folks, 2021 is finally coming to an end and the market is looking very ripe! For the past few weeks, I've been doing research on various stocks, especially small-cap technology and consumer discretionary. A few include $CURI, $APPH, $REE, which all happen to go public via SPACs too! Many of these stocks have been hard hit by shorts through November and December. My goal was to find an undervalued stock that is consistently meeting its goals and has a long runway.

I stumbled upon $SFT / Shift Technologies which ticked all the boxes. $SFT has been taking a beating ever since it went public but November and December were especially turbulent months. From about $7.50 at the start of November, it is now sitting at around $3 and I'm glad this has happened because I wouldn't have discovered this stock otherwise. So let me breakdown why I've invested in $SFT for 2022.

Financials

In the investor presentation $SFT did with Insurance Acquisition Corporation back in July 2020, it set out to double its revenue from 2020 to 2021 and double it once again from 2021 to 2022.



As of now, it has already blown past this goal with Q4 remaining.



$SFT's current price-to-sales ratio is sitting at about 0.5. Over the past 4 quarters, the total revenue is about 520m where as the market cap of $SFT is 260m. peers like Carvana ($CVNA) and Carlotz ($LOTZ) have P/S ratios of 1.82 and 1.27 accordingly even after tanking for the past few months. Using an industry average of the P/S ratio, $SFT's price should at least be $7.50.

Risks

Back in 2020, skeptics said the investor presentation is too hopeful and Shift wouldn't be able to meet its revenue goals which it has since surpassed. Now, the same skeptics argue that this rapid revenue growth is short-lived and is only occurring due to the skyrocketing prices of used cars currently. They have been saying this since months ago but it just keeps getting higher. Shift has plenty of cars left in its inventory and is ready to ride the wave, I expect Q4 to be its first profitable quarter given these insane prices!



Let me explain why it is easy for Shift to sustain this growth in the upcoming years even with a used car price crash! Shift is currently only in 4 STATES (California, Oregon, Texas and Washington). Shift is currently seeking inventory in Las Vegas. After some research, I found out that Shift will soon be entering Florida too (which will mark its entrance into the East Coast). It is currently hiring in Miami (https://boards.greenhouse.io/shift/jobs/5772993002). Once it hires for this role, my guess is that it will start seeking inventory in Florida too! With Las Vegas and Florida, it will only have entered 6 states. 44 more to go and plenty of money to be made 🚀 🚀 🚀



Short Interest

Short interest has been steadily increasing over the past few months. It currently sits at about 30% of the float and keeps increasing steadily. I hope the shorts take their profits soon because they are about to be in trouble!



Positions

I've a few positions in $SFT, mainly in LEAPs. I expect rapid movement upwards once 2022 comes as the tax-loss selling will slow down. This coupled with the high short interest could could propel the stock to about $7.50.

I currently have -

250 May 22 $5 calls bought at 0.35 each

250 Jan 23 $10 calls bought at 0.35 each

I am also thinking about buying 500 Jan 22 $5 calls for 0.05 each given today's massive rise!

Disclaimer: I am not a financial advisor... do your own due diligence.

read-time
3 min
5.00
Target Price
5/ 10
Confidence
6-12 Months
Timeframe
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