With the financial media marinating in bearish stories — 7% inflation, monetary policy set for dramatic tightening as the Fed turns hawkish, and geopolitics in eastern Europe casting a dark pall — bears are very active on the short side.
In fact, according to sentimentrader.com, the total volume in major inverse ETFs, as a ratio to total NYSE Composite volume, is currently at 2.41, which is one of the highest scores ever. Traders are also loading up on put contracts.
That could open the door to some potential short squeeze opportunities. One stock that could be ripe for a squeeze is Exxe Group Inc. (OTC US:AXXA).
Shares recently broke down to new year-to-date lows, but the data surrounding that breakdown shows evidence of a short side attack underway.
During the week from February 9 thru February 16, which is when the stock broke range support, we saw shorting account for over 60% of the stock’s total trading volume, according to OTCshortreport.com.
That suggests AXXA shares are now crowded with shorts, which leads to an increased potential for a short squeeze if the market starts to turn around for the stock.
And there are good reasons to believe it may be ripe for such a turnaround, starting with the company’s latest performance numbers.
A Closer Look
Exxe Group Inc (OTCMKTS:AXXA) is a publicly traded FinTech company that operates at the nexus of Private Equity, Venture Capital, and Distressed Debt. The Company seeks to acquire controlling equity interests in undervalued assets. Once an asset is acquired, Exxe takes an active role by providing both capital and structured financing, as well as operational management expertise. Since 2018, the company has executed 28 acquisitions across a range of different industries.
Exxe has four operating segments: Real Estate, FinTech, Digital & Diversified Technologies, and Agribusiness.
Real Estate has a diversified collection of commercial real estate assets including hotels, mortgages, rental properties, and undeveloped land located in Germany, Switzerland, Eastern Europe, and the United States and Canada.
FinTech includes Blockchain, e-Commerce platforms, Cryptocurrency Exchange and fiat Foreign Exchange (Forex) platforms, and Venture Capital. The Venture Capital assets include a range of early-stage potentially disruptive, high growth assets. These assets are generally illiquid, generate little to no current revenue, and the assets may undergo internal restructurings to establish fresh base valuations. Holdings in this class also have the potential to grow their assets and revenues with well above-average returns.
Digital & Diversified Technologies includes a diversified range of software and hardware assets. Software assets include, but are not limited to, Artificial Intelligence (AI), digital community assets, and media assets. Hardware assets include, but are not limited to, auto parts manufacturing equipment, car engine repair tooling, robotics, and waterway dredging machinery.
Agribusiness assets span a range of activities centered around farming, storage, and transportation. These investments allow the Company to finance growing crops such as barley, wheat, corn, sunflower seeds, and hemp in fields and shipping those crops to wholesale markets around the world. This includes financing, trading, processing, storage, testing, and logistics.
Clear Tangible Growth
As noted above, one clear factor that might help to put some pressure on newly minted shorts in the AXXA tape is the pure fundamentals involved for Exxe Group Inc. (OTC US:AXXA).
The company put out its financials on Feb 16, citing substantial revenue and net income growth year-over-year, a jump in Dec-21 quarterly revenue exceeding 53% to a new record $14.2M vs 2020 results, and soaring net income, posting a record of $3.4 million, up 41.8% from the December 2020 quarter.
According to its release, AXXA also saw strength flow toward the bottom line, with quarterly gross profit and gross profit margin from the year-ago period coming in impressive fashion. Gross profit in the December 2021 quarter grew by over 114% to $6.7 million versus 3.1 million in 3Q21, which resulted in a gross profit margin of 47.4% versus 33.8% in 3Q21. The gross profit margin also enjoyed a healthy rise from the September 2021 (2Q22) levels as the margin was 45.1% for the prior period. While operating expenses grew to reflect the increase in revenue, operating margin of 26.3% compared with the 10.9% margin for 3Q21.
Dr. Eduard Nazmiev, Exxe Group CEO, commented, “We are very pleased with the December quarter, especially our operating and net income achievements. Our diverse yet integrative model is bearing more fruit with each passing quarter, and we are on track to comfortably exceed the $50 million in revenue mark for the 2022 fiscal year, ending in March. This will certainly serve as a landmark year for Exxe and the future remains bright ahead. The combination of our real-world assets such as real estate, agribusiness, automotive and medical products, along with design and green technology are backbones for our Company’s top-line growth and operating profitability. We believe this trend will continue. Combining this group with our online fintech and Metaverse lines should result in continued high growth rates in the current year as well. We continue to target $100 million in revenue for our next fiscal year, beginning in April 2022.”
Market Culture is a Factor
One reason we point out this situation in AXXA is because the market has evolved over the past two years, and retail traders are far more active participants in short squeeze opportunities once the blood is in the water.
There are many recent examples of stocks that have become “meme” favorites during squeezes on message boards, including Avis Budget Group Inc. (Nasdaq:CAR), BlackBerry Ltd. (NYSE:BB), GameStop Corp. (NYSE:GME), AMC Entertainment Holdings Inc. (NYSE:AMC), fuboTV Inc. (NYSE:FUBO), Bed Bath & Beyond Inc. (Nasdaq:BBBY), and Digital World Acquisition Corp. (Nasdaq:DWAC).
We would think about adding AXXA to that list given the pile-up of short interest now seemingly involved.
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