Market Overview

Short Sellers Rush Back in to Certain Social Media Stocks (EBAY, FB, ZNGA)

While short sellers generally shied away from social media companies based in the United States in late January, they came rushing back to certain stocks in the first two weeks of February.

The number of shares sold short in Angie's List (NASDAQ: ANGI), eBay (NASDAQ: EBAY), Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), Pandora (NYSE: P), Yelp (NYSE: YELP) and Zynga (NASDAQ: ZNGA) grew between the January 31 and February 15 settlement dates.

But the short interest in Groupon (NASDAQ: GRPN), LinkedIn (NYSE: LNKD), Shutterfly (NASDAQ: SFLY) and United Online (NASDAQ: UNTD) declined during that time.

Note that U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU) and Yoku Todou (NYSE: YOKU) also saw sharp increases in short interest -- more than 28 percent and about 15 percent, respectively. Short interest swings were smaller in Renren (NYSE: RENN), Sina (NASDAQ: SINA) and Sohu.com (NASDAQ: SOHU).

U.S. social media companies eBay, Facebook and Zynga were hit especially hard by rising short interest between the January 31 and February 15 settlement dates.

eBay

This online auctions and mobile payments leader saw short interest soar about 34 percent in early February to 12.38 million shares. That was the highest number of shares sold short since mid-December. Short interest was about one percent of the float, and the days to cover is more than one.

In early February, eBay's CEO said at a technology conference that more changes would be coming to e-commerce on mobile devices. The company currently has a market capitalization near $71 billion and a long-term earnings per share (EPS) growth forecast of 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 36 analysts who follow the stock that were surveyed by Thomson/First Call, 25 recommend buying shares and none recommend selling. Their mean price target, or where the analysts expect the share price to go, is about nine percent higher than the current share price. That target would be a new multiyear high.

The share price has risen more than 15 percent in the past six months, though it has pulled back about four percent in the past month. The stock has outperformed the likes of Amazon.com (NASDAQ: AMZN) and the broader markets over the past six months.

Facebook

Shares sold short in this social networking giant jumped more than 26 percent to about 25.39 million, essentially erasing the decline in the previous period. The average daily volume dropped more than 24 percent in the period, though. The short interest was less than three percent of the float.

Founder Mark Zuckerberg reportedly owns about 30 percent of Facebook's shares. The company has a market cap of more than $64 billion. While its long-term EPS growth forecast is more than 38 percent, the return on equity is less than one percent, and the P/E ratio is in the stratosphere.

Out of 35 analysts polled, eight of them rate the stock at Strong Buy and 13 others also recommend buying shares. The mean price target indicates upside potential of more than 19 percent. But that target is well less than the post-IPO high set back in May.

Facebook shares have pulled back more than eight percent in the past month, but the share price is still more than 50 percent higher than six months ago. In that time, the stock has outperformed Google and the broader markets.

Zynga

Short interest in the San Francisco-based online social games operator almost doubled, increasing more than 97 percent, to 25.94 million shares in the first two weeks of February. That is the highest number of shares sold short since July, and it represents about five percent of the float.

In early February, Zynga posted better-than-expected earnings results and it settled a copyright suit with Electronic Arts (NASDAQ: EA). Zynga has a market cap near $2.6 billion. The long-term EPS growth forecast is about 21 percent, but the return on equity and the operating margin are both in the red.

Only three of the 23 surveyed analysts recommend buying shares, while 18 recommend holding them. Their mean price target represents more than eight percent potential upside, relative to the current share price. But that target is well below the 52-week high.

The share price is up more than 41 percent year to date, but still down more than 76 percent from a year ago. Over the past six months, the stock has underperformed the likes of Facebook and Electronic Arts.

Posted-In: Amazon.com Angie's List EBAY electronic arts FacebookLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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