Could Reddit Traders Target CLOV for a Short Squeeze?

For some, Clover Health (CLOV) stock looks like a good buy now as its growing popularity on Reddit is stirring rumors of a short squeeze. Clover, a Medicare insurer, went public in 2021 through a Chamath Palihapitiya-sponsored SPAC.

Clover stock pulled back about 1.5 percent on Sep. 9, and nearly 3 percent in premarket trading on Sep. 10. In recent weeks, Clover shares have surged, growing by a double-digit percentage in a single day. CLOV has gained about 10 percent over the past week but is still far below its peak.

Clover Health is among the most popular stocks on Reddit, currently ranking above AMC, Tesla, and Alibaba by mentions on Reddit’s WallStreetBets forum. The forum has been behind some of the most incredible short squeezes on Wall Street.

Many hedge funds have bet against Clover Health, and about 15 percent of Clover shares are shorted. As that level of short interest looks high enough for the Reddit army to drive a short squeeze, Clover’s recent spike might be the result of bearish hedge funds attempting to adjust their exposure to the stock as Reddit readies to attack.

Wall Street’s average target for Clover stock is $9.50, which suggests just a 2 percent upside. Analysts' highest target for the stock is $10. Whereas Wall Street seems to doubt Clover’s prospects as the company battles Hindenburg Research’s claims of investor fraud, Reddit seems to think the stock is undervalued.

If what happened to GameStop and AMC is anything to go by, CLOV stock could explode—right now, the stock is 70 percent below its all-time high.

For 2021, Clover Health has raised its revenue guidance to $1.4 billion–$1.5 billion, and expects its Medicare Advantage membership to rise 21 percent.

If you’re looking for a meme stock that could deliver big returns, you might want to get exposure to CLOV stock as its Reddit popularity surges. However, such battleground stocks aren't suitable for risk-averse investors.