Ondas Inc. (NASDAQ:ONDS) has become one of the most heavily shorted tech stocks in the market. Short interest sits at about 42% of the float, up from just 4% a year ago. That’s surprising given how the business is performing. Ondas posted record Q2 revenue of $83.8 million, more than 13 times higher than a year earlier. It also booked $175 million in new orders during the quarter. Yet the stock has fallen more than 50% from its January high of $15.28. But what does Jim Cramer think about Ondas after its explosive growth and heavy short interest?
Why I Think Shorts Are Staying Put
In my view, the shorts are focused on dilution. Ondas has funded its growth through heavy stock issuance, and its share count has more than doubled over the past year. Several recent acquisitions were also paid partly in stock. Every new share makes it harder for the price to climb, even as revenue grows. Much of the growth has been acquired. If you count the acquired businesses in both years, Q2 revenue grew 85%. That’s still strong, but far below the 13-fold headline. Ondas also posted a net loss of $89.7 million in Q2, and insiders have sold about $44 million in stock over the past year. On top of that, betting against the stock is cheap right now, so short sellers can afford to wait.
The Valuation Is Where Bulls Have a Case
The forward non-GAAP P/E isn’t meaningful since Ondas isn’t profitable yet. The forward Price-to-sales ratio of 7.70x sits about 71% below its 5-year average of 26.95x. Much of that drop reflects revenue finally catching up with the share price. Analysts expect EPS to grow about 77% in 2028, though off a loss-making base. The balance sheet is one of its strongest aspects. Ondas holds $1.38 billion in cash against just $41 million in debt, making it essentially debt-free. Net cash covers about a third of its market value. That gives Ondas a long runway, though much of that cash came from selling shares.
Despite the strong balance sheet, hedge funds have been pulling back. Funds holding Ondas fell from 34 in Q1 to 22 in Q2. Similarly, the value of their stakes dropped from $263 million to $191 million.
The business is clearly growing, but dilution is what the shorts are watching. For shorts to start buying back, I think Ondas needs to stop issuing so many shares and get closer to making a profit. Until then, short interest will likely stay high.
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