Webjet (ASX:WEB) shares have a 9% short interest. What does this mean?

a father measures the height of a small girl standing against a wall in their home.

Webjet Limited (ASX: WEB) shares are among the most shorted on the ASX. The company’s short interest reached 9.3% this week.

That makes it the fourth most shorted Australian stock.

But what does that actually mean? Let’s take a look at the implications of Webjet’s considerable short interest.

What does Webjet shares’ short interest mean for investors?

The Webjet share price is still under short attack, and it might be bad news for those invested in the company for growth.

To put it simply, short selling is a way for large-scale investors to profit from share price falls.

To ‘short’ a stock, a person must borrow it from another investor for a designated amount of time. The borrower then sells those loaned shares on the market.

The idea is the borrower will take the cash from selling the loaned shares and sit on it for a time.

If all goes well for the short seller (and poorly for long term investors), the share price of the borrowed stock will fall.

That will let the short seller buy the loaned shares back for less than they sold them for, before returning the stock to their owner.

The short seller can then pocket the difference as profit.

So, what is short interest? It’s how many of a company’s shares are currently involved in short selling operations.

Thus, 9.4% of Webjet’s outstanding shares are currently being wagered on its share price falling in the short to medium term.

Of course, that figure is probably worrying to many long-term investors.

Still, there’s always a chance the share price will go up and short sellers will have to fork out more than they earned to return the shares.

Interestingly, that’s what many brokers seem to expect will happen.

As The Motley Fool Australia recently reported, Morgans and Goldman Sachs both expect to see growth out of the company.

Goldman Sachs has a price target of $6.90 on the travel company’s stock, while Morgans has slapped it with a target of $6.60.

As of Monday’s close, the Webjet share price is $5.04, leaving the brokers predicting it has an upside of 30% to 36%.

The post Webjet (ASX:WEB) shares have a 9% short interest. What does this mean? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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