GigaCloud Technologies (GCT -2.78%) stock is seeing strong bullish momentum this week. The e-commerce company's share price was up 21.1% from last week's market close before the market opened this Friday, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index was up 0.6%, and the Nasdaq Composite index was up 0.7%.
There isn't any business-specific news pushing GigaCloud stock higher this week, but the company's share price continues to gain ground thanks to momentum for the broader market and the ongoing effects of a short squeeze.
Investors who bet against the stock are being forced to close out their short positions as the e-commerce specialist's share price has continued to move higher, and that's creating even more bullish momentum. GigaCloud's share price is now up 134% over the last three months.
What's driving GigaCloud's incredible gains?
GigaCloud had its initial public offering in August 2022. Despite attracting some early excitement as a meme stock, the company's share price fell precipitously after its public debut.
On the heels of volatility, the company also became a target for short sellers -- investors who were betting that the company's share price would fall. In September 2023, short-selling firm Culper Research published a note on the stock citing the following warning signs that it was at risk of imploding: GigaCloud's Cayman incorporation, a China-based auditor, cash held offshore despite U.S. operations and USD financial statements, and very little interest income despite supposedly large cash balances.
While the Culper report raised some potential red flags, GigaCloud reported strong third-quarter results in November. Along with momentum for the broader market, the Q3 report has triggered big gains for the stock. In turn, short sellers have been buying back the stock in order to minimize their losses, and the extra purchasing has helped push the company's share price even higher.
What comes next for GigaCloud stock?
At least for now, GigaCloud's recent business results seem to have silenced many bears and short sellers. The company's revenue rose 39% year over year to reach $178.2 million in the third quarter. The company also closed out the quarter with a cash position of $214 million.
Meanwhile, gross profit surged 117% to hit $48.9 million, and overall net income surged to $24.2 million -- up from just $0.7 million in last year's quarter.
The business is posting some strong sales momentum and very encouraging progress on the margins front. Whether or not this trajectory will continue over the long term remains to be seen.
Even after its recent rally, GigaCloud's share price is still down roughly 62.5% from its high. While it's certainly possible that an impressive rebound could continue, investors should keep the stock's high levels of volatility and the company's uncertain business outlook in mind. Excitement and short-squeeze momentum are strong right now, but this is a high-risk, high-reward type of play.
