2 Stocks That Crushed Short Sellers With Impressive Gains

Core Insights - Short sellers aim to profit from declining stock prices by exposing alleged misconduct or fraud in target companies, which can lead to a sell-off and further price drops [1] - Short selling can backfire, leading to a short squeeze if the targeted company disputes claims or releases positive information [2] Company Analysis: Stride Inc. (NYSE: LRN) - Fuzzy Panda Research alleged that Stride's earnings were inflated due to reliance on ESSER COVID funding, predicting an "EBITDA cliff" as these funds diminish [2][3] - The report triggered a 9% drop in Stride's stock price, falling from $70.66 to a low of $63.37 on the day of the report [4] - Following the report, Stride released strong fiscal Q1 2025 earnings, with EPS of 94 cents, exceeding estimates by 72 cents, and revenues of $551.08 million, up 14.8% YoY [5] - Stride's stock surged 45.4% in response to the earnings report, indicating a significant short squeeze [6] Company Analysis: Axos Financial Inc. (NYSE: AX) - Hindenburg Research claimed Axos Financial was at risk due to its exposure to high-risk asset classes and lax underwriting practices, suggesting potential accounting improprieties [7] - The stock initially dropped nearly 16% to $44.10 following the report but rebounded to $52.46 within two days, indicating a recovery from the short-selling pressure [8] - Axos Financial's stock later climbed 79.57% from its low of $44.10, reaching a high of $79.16, suggesting that short sellers faced losses if they entered positions after the report [8]