Cracker Barrel Jumps Into A Short Squeeze On Upgrade, Tar…

On Wednesday morning, Cracker Barrel Old Country Store (CBRL) shares soared 30% following an analyst upgrade, driven by price target hikes amid heavy short interest. The stock had already risen about 8% over the preceding days, now total growth is around 40% this week. Analysts noted that about 27% of the float was held short, raising upward pressure as shorts covered positions. Despite a revenue drop of 2.9% to $797.4 million, earnings of 29 cents per diluted share exceeded expectations, further encouraging market confidence. Year-to-date, Cracker Barrel's stock has increased over 80%, despite being 50% below its high from last July.

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Stock Market Sell-Off Justifies This Downgrade; These 3 Growth Stocks Garner New Sell Signals

Shares of Cracker Barrel Old Country Store ( CBRL) soared 30% on Wednesday morning, amid analyst price target hikes. An upgrade to overweight from UBS pointed out that the shares were heavily shorted.

Shares of Cracker Barrel had already advanced about 8% on Monday and Tuesday. The stock is now up about 40% this week, according to MarketSurge.

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About 27% of the float is currently held short, according to MarketSurge. Generally speaking, a short interest of about 10% is typically viewed as elevated. Anything above 20% is considered extremely high. When traders short a stock they are betting the price will fall. However, if it starts to rise short sellers are forced to buy more of the stock to cover their impending losses. Those forced purchases place added upward pressure on the price.

Shorts against Cracker Barrel have increased by 3.6%, meaning it would now require about 5.8 days of the stock's average trading volume for short sellers to buy back all their shares. The meme stock crowd had not yet picked up on the action, with Cracker Barrel not registering among the top 50 stocks trending early Wednesday on the Ape Wisdom stock list.

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Cracker Barrel Earnings Overperform

On Tuesday, the casual dining restaurant in the midst of a turnaround reported earnings that beat Wall Street's rather low expectations. When that happened the stock jumped more than 6% on the day. Bad news for short sellers.

Both earnings and revenue fell compared to last year, but less than analysts had expected. Quarterly revenue fell 2.9% to $797.4 million. Analyst consensus had expected a decline of more than 5%, according to FactSet. Meanwhile, adjusted earnings per diluted share slipped 50% to 29 cents apiece. That was an incredible financial result considering, the consensus forecast was for a loss of 48 cents a share, according to FactSet.

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Further buoying the stock — and worrying short sellers — was a raft of analysts who changed their tune about the company. Citi, UBS, and Wells Fargo all upped their price targets on Cracker Barrel. Wells Fargo actually upgraded the stock to "overweight" from "equal weight" along with raising its target price from $35 to $50. That implies upside of 38% vs. where the stock closed on Tuesday.

So far this year, Cracker Barrel stock is up more than 80%. In the last four weeks alone the stock is up about over 50%. The stock closed Tuesday 50% below its recent high, set in July of last year.

Cracker Barrel Jumps Into A Short Squeeze On Upgrade, Target Hikes

Cracker Barrel Earnings Overperform

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