This JLO Stock Has HUGE Short Squeeze Potential… But Does The Shoe Fit?

Just when we all thought the meme stock world had quieted down, leaving us all staring at our boring portfolios (yawn), behind the scenes, something’s been brewing. And no, it’s not another GameStop resurrection led by Roaring Kitty (although that would be nice). 

This time, we’re looking at Designer Brands (DBI), a shoe retailer, and believe it or not, Jennifer Lopez is somehow involved in this potential short-squeeze. Yeah, J.Lo – the same person who brought us the Super Bowl halftime show and Bennifer 2.0 (that didn’t last long).

Let’s rewind to early 2020. J.Lo, fresh off her Hustlers fame, teamed up with Designer Brands to launch her very own line of shoes and handbags. The JLO Jennifer Lopez Collection was supposed to be the next big thing. But then COVID hit, states started shutting down, and suddenly, the world didn’t care about looking cute. Sales for the JLO line flopped harder than her and Ben affleck's romantic comedy Gigli back in 2003 (yeah, I went way back for that one).

Fast forward a couple of years, and Designer Brands is still struggling to regain its footing (see what I did there?). In their latest earnings call, they posted a $0.29 adjusted EPS – missing expectations by almost $0.25. Revenue? A sad $771.9 million, marking the sixth time in seven quarters that sales declined year-over-year. And just for good measure, the company cut its full-year guidance, dropping its projected sales growth to “flat to low single digits.”

So, how do you explain the fact that DBI’s stock has surged 20% in the past week? I mean, this is the same company that reported negative free cash flow, with cash reserves down 21% since February and inventories up 12.5%.

So, what gives? Two words: short squeeze. According to the most recent data, nearly 94% of DBI’s float was shorted. That’s a massive bet against the company, and with this much short interest, it only takes a little momentum for things to snowball. All of a sudden, short sellers are caught in a tough spot, scrambling to cover their positions.

Designer Brands’ 50-day simple moving average (SMA) is creeping up, and if it crosses that key threshold, we could be looking at some serious chaos. Think of it as the point where the WallStreetBets crowd smells blood in the water, swarms in with a barrage of memes, and pushes the stock to new, dizzying heights. The shorts would have to cover fast, leading to even more upward pressure on the stock.

Let’s be clear, though – this isn’t some “set it and forget it” kind of trade. It’s more like walking a tightrope over a shark tank. You might be able to make a quick buck, but you’ll need to stay glued to your screen, ready to smash that sell button. The potential for a short squeeze is real, but as momma always says, safety first.

With Designer Brands riding a tsunami of short interest (nearly 94% of its float is shorted), J.Lo’s name adding some potential meme magic to the cake, and all the right ingredients brewing for a meme stock storm, a short squeeze seems to be right around the corner. But only time will tell if the shoe fits with this one.

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Stock.News does not have positions in companies mentioned.