Market Overview

Short Sellers Move on Zynga, Retreat from eBay

Among the social media players, eBay (NASDAQ: EBAY), Groupon (NASDAQ: GRPN) and Zynga (NASDAQ: ZNGA) saw the biggest swings in short interest between the April 15 and April 30 settlement dates.

Other social media companies based in the United States that also saw the number of shares sold short rise in the period include Google (NASDAQ: GOOG), Pandora (NYSE: P) and United Online (NASDAQ: UNTD).

But short sellers shied away from Angie's List (NASDAQ: ANGI), Facebook (NASDAQ: FB), LinkedIn (NYSE: LNKD), Shutterfly(NASDAQ: SFLY) and Yelp (NYSE: YELP) in the latter two weeks of April.

Also, note that U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU) and Renren (NYSE: RENN) and rose somewhat to the middle of April. But short interest in Sina (NASDAQ: SINA), Sohu.com (NASDAQ: SOHU) and YouKu Todou (NYSE: YOKU) fell.

eBay

Short interest in this San Jose, California-based online commerce company declined by more than 22 percent to 11.86 million shares in the final weeks of April. That erased a 23 percent rise in the previous period. The number of shares sold short was about one percent of the float.

In mid-April, eBay's first-quarter revenues fell short of consensus estimates and its second-quarter guidance disappointed investors. The company has a market capitalization of about $72 billion. The long-term earnings per share (EPS) growth forecast is about 15 percent. The operating margin is better than the industry average, though the return on equity is less than 14 percent.

Of the 39 analysts who follow the stock and were surveyed by Thomson/First Call, 30 recommend buying shares, 11 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is more than 12 percent higher than the current share price. That target would be a new multiyear high.

However, the share price is only about three percent higher than at the beginning of the year. But it is up more than 15 percent over the past six months, and the stock's performance has been in line with competitor Amazon.com (NASDAQ: AMZN) in that time.

Groupon

This online local commerce marketplace saw short interest retreat about 18 percent in late April to 34.58 million shares, which was the lowest it has been since February. The number of shares sold short fell to about 10 percent of the float, but days to cover was still more than three.

In April, Groupon launched a new search app, and an options trader made a big bet that the stock would hold recent gains. The company currently has a market cap near $4 billion. While Groupon has a long-term EPS growth forecast of about 25 percent, its PEG ratio is higher than the industry average and the return on equity is in negative territory.

Only three of the 24 polled analysts recommend buying shares. The consensus recommendation has been to hold shares for at least the past three months. The share price has outrun the mean price target, meaning the consensus is that there is no potential upside at this time.

The share price has risen more than 25 percent year-to-date, including a pop of more than six percent this week, though that is a partial recovery from a recent pull back. The stock has outperformed Facebook and the broader markets over the past six months.

Zynga

Short interest in the San Francisco-based online social games operator jumped more than 25 percent to 33.43 million shares. That was the highest level of short interest since last June. The number of shares sold short represents about six percent of the float. But days to cover is about one.

Zynga posted a profit for the first quarter, though revenue declined and the company warned of a second-quarter net loss. 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. While their mean price target is more than 17 percent higher than the current share price, that target is well below the 52-week high from almost a year ago.

The share price is up more than 34 percent year to date, though shares have traded mostly between $3.00 and $3.50 since March. Over the past six months, the stock has outperformed Facebook but underperformed the likes of Electronic Arts (NASDAQ: EA).

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

 

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