Short Sellers Shy Away from Social Media Stocks (EBAY, FB, ZNGA)
By and large, the short interest in social media companies based in the United States dwindled in the latter two weeks of January.
The short interest in Angie's List (NASDAQ: ANGI), eBay (NASDAQ: EBAY), Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), Groupon (NASDAQ: GRPN), LinkedIn (NYSE: LNKD), Pandora (NYSE: P) and Zynga (NASDAQ: ZNGA) declined between the January 15 and January 31 settlement dates.
The biggest percentage swings in short interest in the stocks of U.S. social media companies between the January 15 and January 31 settlement dates happened to eBay, Facebook, Zynga.
This online auctions and mobile payments leader saw short interest decrease more than nine percent in late January to 9.23 million shares. That was the lowest number of shares sold short in at least a year. Short interest is less than one percent of the float, and days to cover remains at one.
In late January, eBay said its fourth-quarter revenue topped consensus estimates due in part to record holiday sales and sales on mobile devices. The company has a market capitalization near $74 billion and a long-term earnings per share (EPS) growth forecast is more than 14 percent. Its price-to-earnings (P/E) ratio is higher than the industry average, but so is the operating margin.
Of the 35 analysts who follow the stock that were surveyed by Thomson/First Call, 23 recommend buying shares and none recommend selling. Their mean price target, or where the analysts expect the share price to go, is more than five percent higher than the current share price. That target would be a new multiyear high.
The share price has risen more than 24 percent in the past six months, and the stock has outperformed the likes of Amazon.com (NASDAQ: AMZN) and Google in that time, as well as the broader markets.
Shares sold short in this social networking giant fell more than 19 percent to about 20.54 million. That was the lowest level of short interest since the initial public offering last May. The short interest is now about two percent of the float.
Facebook says it has more than one billion users. It has a market cap of more than $65 billion. The company posted better-than-expected fourth-quarter results. Earlier in the month, it launched its new Graph Search feature. The company's long-term EPS growth forecast is an attractive 38+ percent, but the return on equity is less than one percent, and the P/E ratio is in the stratosphere.
Out of 35 analysts polled, 11 of them rate the stock at Strong Buy and 13 others also recommend buying shares. The mean price target indicates upside potential of about 20 percent. But that target is less than the post-IPO high set back in May.
Shares are trading in the same neighborhood as at the beginning of the year. Over the past six months, the stock has outperformed Google and the broader markets.
Short interest in the San Francisco-based online social games operator increased almost 11 percent to 13.14 million shares. Shares sold short represent more than two percent of the float. Days to cover is about one.
In late January, Zynga faced speculation in the press that it was "doomed" and it announced the resignation of its chief game designer. The company now has a market cap near $2.5 billion. The long-term EPS growth forecast is about 21 percent, but the return on equity is in the red and the PEG ratio is greater than the industry average.
Only two of the 23 surveyed analysts recommend buying shares, while 18 recommend holding them. Their mean price target is in the same ballpark as the current share price. And they are both well below the 52-week high.
The share price is up more than 53 percent year to date, but still down more than 72 percent from a year ago. Over the past six months, the stock has underperformed the likes of Facebook and Electronic Arts (NASDAQ: EA).
Exchange traded fund Global X Social Media Index ETF (NASDAQ: SOCL) is up more than nine percent year to date.
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