Market Overview

Short Interest Swings in Social Media Stocks (FB, GRPN, LNKD)

Short sellers continued to pile on to Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), Pandora (NYSE: P) and Zynga (NASDAQ: ZNGA) between the February 15 and February 28 settlement dates.

But they shied away from other social media companies based in the United States during that period. The short interest in Angie's List (NASDAQ: ANGI), eBay (NASDAQ: EBAY), Groupon (NASDAQ: GRPN), LinkedIn (NYSE: LNKD), Shutterfly (NASDAQ: SFLY), United Online (NASDAQ: UNTD) and Yelp (NYSE: YELP) declined by the end of the month.

Also, note that U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU), Renren (NYSE: RENN), Sohu.com (NASDAQ: SOHU) and YouKu Todou (NYSE: YOUKU) increased to the end of February as well. But short interest in Sina (NASDAQ: SINA) dwindled.

U.S. social media companies Facebook, Groupon and LinkedIn saw the largest percentage swings in short interest between the February 15 and February 28 settlement dates.

Facebook

Shares sold short in this social networking giant rose more than 12 percent to about 28.49 million, following an increase of more than 26 percent in the previous period. The end of February saw the highest level of short interest so far this year, but it was far less than the peak of more than 95 million shares last November.

Facebook suffered a cyber attack in mid-February, and it bought the Atlas ad business from Microsoft (NASDAQ: MSFT) late in the month. The company has a market capitalization of more than $65 billion. While its long-term earnings per share (EPS) growth forecast is more than 29 percent, the return on equity is less than one percent and the price-to-earnings (P/E) ratio is in the stratosphere.

Out of 35 analysts who follow the stock that were surveyed by Thomson/First Call, 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 17 percent. But that target is well less than the post-IPO high set back in May.

Facebook shares are trading in the same neighborhood as at the beginning of the year. The share price is still more than 34 percent higher than six months ago. In that time, the stock has outperformed Google and the broader markets.

Groupon

This online local commerce marketplace saw short interest retreat almost 14 percent in late February to 27.51 million shares, the lowest number of short shares since June. Short interest was about eight percent of the float, and it has been declining since November.

In late February, Groupon ousted CEO and founder Andrew Mason following disappointing quarterly results. The company currently has a market cap near $3.5 billion and a long-term EPS growth forecast of almost 22 percent. The forward earnings multiple is less than the industry average P/E ratio. But the return on equity is in the red.

Of the 25 polled analysts, only three of them recommend buying shares. The mean price target, or where the analysts expect the share price to go, is only marginally higher than the current share price. And that target is much less than the 52-week high.

The share price has risen about nine percent year to date, despite some volatility last week. But shares are trading more than 67 percent lower than where they were a year ago. The stock has underperformed Facebook and LinkedIn, but outperformed the broader markets, over the past six months.

LinkedIn

Short interest in this online professional network operator fell off by about 15 percent to 3.82 million shares in the final two weeks of February. That is the lowest number of shares sold short in at least a year, though it represents more than four percent of the float.

In late February, LinkedIn reported having more than 37 million users in the Asia-Pacific region. The Mountain View, California-based company has a market cap near $19 billion. The long-term EPS growth forecast is about 60 percent, but the P/E ratio is much higher than the industry average. The operating margin is in line with the industry average, but the return on equity is less than three percent.

Fourteen of the 27 surveyed analysts recommend buying shares, while 13 recommend holding them. The current share price is higher than the mean price target, suggesting that analysts see no upside potential at this time.

That could be because shares are trading near an all-time high. The share price is more than 95 percent higher than a year ago. Over the past six months, the stock has outperformed the likes of Facebook and Google.

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

 

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