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(Bloomberg) — An earnings beat by Contemporary Amperex Technology Co. Ltd. next week may set the stage for a short squeeze, after a surge in the battery maker’s shares on bets tied to soaring energy prices.
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Some 29.3 million of CATL’s Hong Kong-listed stock have been sold short, near the highest since its listing last May, according to data from S3 Partners. That’s even as it’s surged about 35% since the start of the Iran war, helped by better-than-expected results for the December quarter.
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The stock could get a further lift with CATL’s report due April 15. Recognition of upside surprise risk is growing, with analyst earnings-per-share estimates for the first three months of the year rising over the past four weeks.
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“Should first-quarter earnings exceed expectations once again — especially against the backdrop of global energy price volatility — it would underscore how deeply the trend toward intelligent electrification is taking hold,” said Zhai Jingyong, managing director at Banyan Investment Management Co. in Shenzhen. “A short squeeze in Hong Kong cannot be ruled out in that case.”
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Short sellers are already looking at $506 million in paper losses on CATL from March 4 through April 8, according to S3. The stock carries the highest short‑squeeze risk score among Hang Seng Index constituents tracked by the financial analytics firm.
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Meanwhile investors have been snapping up shares of energy storage makers on an outlook for strong demand due to the shift away from fossil fuels. While gains driven by the Iran war oil spike may fade, the longer term global trend of green energy transition is seen intact.
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That’s helped CATL offset disappointing demand for electric-vehicle batteries. Its first-quarter revenue is expected to have risen 35% from a year ago to 114 billion yuan ($17 billion), with net income up about 30%.
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Demand remains strong with Morgan Stanley projecting CATL’s energy storage system newbuilds up 51% sequentially in the first half.
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At the same time, the Chinese government is making strides to keep supply in check. CATL shares jumped 8% Friday in Hong Kong, excluding ex-dividend impact, after officials summoned leading battery makers to reinforce a call to restrict capacity expansion.
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CATL is still seen as the industry leader. Morgan Stanley said the company “sits at the intersection of structural energy themes,” from powering AI data centers to China’s energy security push. Jefferies Financial Group Inc. has dubbed the the company the “TSMC of electrification” due to its wide business moat and aggressive expansion.
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While some are looking for a short squeeze after its earnings report, the stock also could be subject to profit taking. Arbitrage is another risk factor, with the Hong Kong shares tending to slip whenever their premium over the Shenzhen stock becomes pronounced.
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