Why have Flight Center shares been the most shorted on the ASX every week so far in 2022?
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Flight Center Travel Group Ltd (ASX: FLT) shares have been the most shorted on the ASX every week of this year so far.
After starting the year out at around 12.6%, short interest in its stock reached a high of 18% in April. It has since settled to come in at 14.6%, as of the latest data available earlier this week.
While that’s a definite improvement on its intra-year high, it still means a significant number of the company’s shares are being used to bet against it.
So, what might be behind Flight Centre’s notable short position? Let’s take a look.
Why are short sellers piling on Flight Center shares?
Flight Center shares have topped The Motley Fool Australia’s weekly short-selling breakdown every week of 2022 so far.
That means short sellers are borrowing stock in the company before selling it on the market for cash. When those stocks are due to be returned to their owner, the short seller will snap them back up on the market and return them.
Thus, any drop in the Flight Center share price is a win for short sellers who pocket the fall as profit. Of course, it can go the other way as well. Short sellers take a financial hit from any gains posted by a stock they’ve shorted.
But short sellers targeting the Flight Center share price have likely had a fair run so far this year.
The company’s share price has fallen nearly 9% in 2022 to date. Although, that’s only slightly worse than the broader market’s performance. The S&P/ASX 200 Index (ASX: XJO) has slumped close to 8% year to date.
So, what might be driving short sellers to target the Flight Center share price?
Well, they presumably expect the company’s post-COVID recovery to be bumpy. If that’s the case, they’re not alone.
Indeed, as my Fool colleague reported in late August, no major brokers have buy ratings on Flight Center shares. Although, some are tipping notable upside for its share price.
Flight Centre’s leisure and corporate businesses returned to profit in the final half of financial year 2022, buoyed by a strong final quarter. However, the company has not provided guidance for financial year 2023.
Meanwhile, Morgans expects cyclical factors to weigh on the company’s bottom line while Goldman Sachs was disappointed by its United States performance, as The Motley Fool Australia reported.