Maxeon Solar Technologies, Ltd. (NASDAQ: MAXN) experienced a significant premarket price movement this week. Despite a 3.5% dip on Wednesday, the stock surged by an impressive 27% in the early premarket hours on Friday following the 4th of July holiday.

This unexpected rise has left investors puzzled, as there was no apparent news to justify the sharp increase, leading to concerns about a potential profit-taking dip in the coming days.

Recent Maxeon Challenges

The company's stock has been under pressure, dropping more than 84% over the past year, influenced by several factors. In Q1 2024, Maxeon reported revenues of $187 million, a steep decline from $318.3 million in Q1 2023.

This drop was attributed to challenging market conditions, increased borrowing rates, and regulatory changes affecting demand. Furthermore, the stock faced additional pressure after Maxeon issued a 'going concern' warning and announced a $100 million equity investment and $97.5 million debt investment from its main stakeholder, TCL Zhonghuan Renewable Energy Technologies, causing significant dilution of shares.

Potential Short Squeeze and Analyst Opinions*

The recent surge in Maxeon's stock price might be linked to the potential for a short squeeze. Indicators such as a lowering cost to borrow shares, a 10x increase in trading volume over the past two days, and a strong support level at $0.17 suggest that short sellers might be under pressure. Additionally, with a max pain price of $1 for the next day, market forces could push the price up, further pressuring short sellers to cover their positions.

Maxeon is heavily shorted, with about 64% of its total float shorted, particularly by hedge funds. Despite these challenges, some analysts see potential upside for the stock. Over the past three months, seven Wall Street analysts have set 12-month price targets for Maxeon, with an average of $2.17, suggesting a possible upside of 110.68%. However, the consensus remains a "Moderate Sell."

Conclusion

Maxeon Solar Technologies remains a volatile stock, heavily influenced by market dynamics and company-specific challenges. While the recent afterhours surge has brought a glimmer of hope for bulls, the underlying issues and heavy short interest indicate that the road ahead may be rocky. Investors should remain cautious and keep an eye on market developments as they unfold.