Hortonworks May Have Pre-Earnings Short Squeeze On Its Hands

Shares of software stock Hortonworks Inc HDP were up by 8 percent on Monday following an upgrade from Mizuho from Neutral to Buy. The latest short interest numbers suggest the strong move on the upgrade news may in part be due to a short squeeze ahead of the company’s Q4 earnings report expected out on February 8.

Mizuho analyst Abhey Lamba was clear that the firm expects an earnings beat from Hortonworks when it reports Q4 numbers.

“For 4Q16, we expect numbers to come in above estimates on favorable checks,” she wrote. Short sellers understandably don’t want to be in on the wrong side of an earnings beat.

Hortonworks shares have struggled to tread water during a strong market rally in the past year. In the past 12 months, the stock is down 1 percent, but short interest has steadily increased by 32.4 percent.

According to shortsqueeze.com, the stock currently has an extremely high short percent of float of 27.7 percent. There are more than 7.1 million shares of Hortonworks held short with 15.3 days to cover.

Mizuho isn’t the first Wall Street firm to come out bullish on Hortonworks in recent weeks. Earlier this month, Wells Fargo initiated coverage of the software stock at Outperform.

Short sellers may now be looking at Q4 earnings as major potential upside catalyst for the stock. If that’s the case, a major pre-earnings short squeeze may still be in the early stages.