PRTY Stock Alert: Near-Bankrupt Party City Braces for Short Squeeze thumbnail

PRTY Stock Alert: Near-Bankrupt Party City Braces for Short Squeeze

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Party City (PRTY) sign over storefront with clouds and blue sky in background

Source: Sheila Fitzgerald/shutterstock.com

One of the worst performers of 2023 until today, Party City (NYSE:PRTY) stock has been pretty disappointing for investors. Declining more than 95% over the past 12 months, shares have seen a peak-to-trough decline of over 60% just in 2023. That said, this party retailer is recovering some of those losses today, currently up more than 25% on hopes for a short squeeze.

Additionally, various reports are out now highlighting Party City’s plans to file for bankruptcy in the coming weeks. While many investors would not view this development as a positive, retail traders looking for a short squeeze-induced surge are getting their wish. Now, the question many investors have is just how much negative sentiment is being priced in?

With that said, let’s dive into whether investors should make anything of this recent move in PRTY stock.

Can PRTY Stock Sustain Today’s Move?

While previous short squeeze attempts have proven to be in vain for PRTY stock, perhaps this time is different. After all, macro conditions do appear to be changing. Recent jobs reports and upcoming consumer price data could show that inflation is coming down. With less inflation, the potential for lower interest rates increases. At least, that’s what many in the market are hoping for.

It’s unclear whether a pause — and more importantly, a pivot — will come in time for Party City. Like other embattled retailers, the company has its own set of problems that lower interest rates may not fix. Supplier-related shortages, staffing issues and store closures don’t bode well for growth. Accordingly, the story around PRTY stock is murky at best.

Personally, I think Party City is a company with high short interest that’s being shorted for a reason. Investors who believed the company would likely go bankrupt appear to have been proven right. Thus, now may not be the time to cheer today’s price action.

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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.