In this article, we will take a look at some of the most shorted penny stocks that currently appear highly attractive with impressive upside potential. On April 23, broader market indices reached new records, with the S&P 500 and Nasdaq closing at their highest-ever levels after President Donald Trump announced that he had extended the United States’ ceasefire with Iran. The move boosted investor sentiment, as the S&P 500 Index rose 1.05% to 7,137, while the Nasdaq Index gained 1.64% to 24,657. The Dow Jones Industrial Average increased by 341 points, representing a rise of 0.69%, closing at 49,490.

According to Ben Fulton, CEO of WEBs Investments, stocks are emerging from the Middle East’s chaos, and it is now time to put geopolitics in the rearview mirror.

Over 80% of S&P 500 firms have exceeded expectations in recent quarterly earnings results. Boeing’s stock surged 5.5% due to lower quarterly losses. GE Vernova jumped almost 14% after exceeding its income goals. Some key performers are Netflix, which emerged as the leading retail trade with a total trading volume of $290 million over five days, and cannabis stocks, which advanced on news of marijuana legalization. ASMI went up by nearly 8% after beating estimates. Oracle gained 3.4% on cloud growth.

With this backdrop, let’s explore our 10 Most Shorted Penny Stocks to Buy.

Our Methodology

To identify relevant stocks for this article, we conducted a sector-agnostic screening of U.S.-listed companies with market capitalizations above $200 million and share prices below $5. We narrowed down our search to include stocks with short interest above 15%. Also, we only shortlisted stocks with at least 25% upside potential, according to consensus, as of the April 23 close. Finally, we selected 10 stocks with the highest upside and ranked them in ascending order.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).

10. 1-800-FLOWERS.COM Inc. (NASDAQ:FLWS)

1-800-FLOWERS.COM Inc. (NASDAQ:FLWS) is one of the 10 most shorted penny stocks to buy.

On April 20, 1-800-Flowers.com Inc. (NASDAQ:FLWS) announced a severance arrangement with Thomas Hartnett, its former President, who resigned on February 28, 2026. Hartnett had been serving as a Special Advisor to the CEO since November 3, 2025. He was actively participating in helping the company through transition before he resigned from the job.

Currently, the company is experiencing cash burn, along with a 9.81% decline in topline that amounted to $1.59 billion, during the last 12 months. This resulted in a negative EPS of $3.34 per share. However, there are reasons to be optimistic about the stock.

Back on March 23, Noble Capital raised its rating on 1-800-Flowers.com Inc. (NASDAQ:FLWS) from Market Perform to Outperform with a price target of $3.75. The firm believes that the stock is currently trading at a cheaper valuation relative to its peers.

According to Noble Capital, this appears to be an interesting opportunity for long-term investors if they are willing to look past the near-term low revenue visibility scenario. Such a projection makes it one of the best penny stocks that has lately been heavily shorted.

1-800-FLOWERS.COM Inc. (NASDAQ:FLWS) offers gifts such as floral and fruit arrangements, fresh-cut flowers, greeting cards, personalized products, and more. It also provides food items, which include cookies, wines, candies, and chocolates, to name a few. It uses several online platforms to sell its products, like PersonalizationMall.com, BloomNet, FruitBouquets.com, and more.

9. Virgin Galactic Holdings Inc. (NYSE:SPCE)

Virgin Galactic Holdings Inc. (NYSE:SPCE) is one of the 10 most shorted penny stocks to buy.

On April 13, Goldman Sachs reduced the price target from $4.18 to $3.75 for Virgin Galactic Holdings Inc. (NYSE:SPCE), which still yields more than 28% upside potential at the current level. The firm maintained a Neutral rating on the shares following the company’s fourth-quarter results.

Goldman Sachs is now updating its model based on revised forecasts about margins and revenues. During the quarter, Virgin Galactic also reiterated its plans for its flight-testing program and space flights.

On April 10, Susquehanna increased the price target on Virgin Galactic Holdings Inc. (NYSE:SPCE) from $2.50 to $3, while maintaining a Neutral rating on the stock. The firm implemented this model update alongside a broader first-quarter earnings preview for the aerospace and defense segment.

Susquehanna reflected on the ongoing crisis in the Middle East and highlighted the advanced military capabilities of the United States and the urgent need to rapidly enhance domestic defense industry capacity. The firm has anticipated a significant growth cycle in the sector lasting three to five years.

This enduring structural growth is primarily fueled by heightened geopolitical risks, the ongoing emphasis on the Golden Dome initiative, continuous inventory restocking cycles, and increasing purchasing needs from global partners. This supports our bullish stance towards Virgin Galactic Holdings Inc. (NYSE:SPCE).

Virgin Galactic Holdings Inc. (NYSE:SPCE) is a developer and operator of spaceships and related systems. Its services portfolio includes flight testing, spaceflight operation, manufacturing, development, and post-flight maintenance of spaceflight systems. It provides services to government agencies, private individuals, and researchers.