Market Overview

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

Short sellers piled on to Groupon (NASDAQ: GRPN) in the wake of the ouster of the company's chief executive officer.

Short interest for these other social media companies based in the United States also rose between the February 28 and March 15 settlement dates: Angie's List (NASDAQ: ANGI), Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), LinkedIn (NYSE: LNKD), Shutterfly (NASDAQ: SFLY) and Zynga (NASDAQ: ZNGA).

But short sellers shied away eBay (NASDAQ: EBAY), Pandora (NYSE: P), United Online (NASDAQ: UNTD) and Yelp (NYSE: YELP) in the first two weeks of March.

Also, note that U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU) and YouKu Todou (NYSE: YOUKU) increased somewhat to mid-March as well. But short interest in Renren (NYSE: RENN), Sina (NASDAQ: SINA) and Sohu.com (NASDAQ: SOHU) dropped by double-digit percentages.

U.S. social media companies Facebook and Google and Groupon saw the largest percentage upswings in short interest between the February 28 and March 15 settlement dates.

Facebook

Shares sold short in this social networking giant rose about 13 percent to about 32.23 million, following an increase of more than 12 percent in the previous period. Mid-March 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 short last November.

Facebook redesigned its News Feed feature and deepened its ties with Netflix (NASDAQ: NFLX) in early March. The company has a market capitalization of more than $59 billion. While its long-term earnings per share (EPS) growth forecast is about 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 34 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 25 percent. But that target is less than the post-IPO high set back in May.

Facebook shares are trading about 10 percent lower than at the beginning of the year. The share price is still about 24 percent higher than six months ago. In that time, the stock has outperformed Google and the broader markets.

Google

Short interest in this Mountain View, California-based Internet Goliath increased by about 12 percent to 4.91 million shares in the first two weeks of March. That is the highest number of shares sold short so far this year, though it represents less than two percent of the float.

In early March, Google settled a Street View privacy case, replaced its Android chief and announced the end of Google Reader. The company has a market cap near $264 billion. The long-term EPS growth forecast is almost 15 percent, but the P/E ratio is about 25. The operating margin is greater than the industry average, and the return on equity is more than 16 percent.

Of the 36 surveyed analysts, 26 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 less than eight percent higher than the current share price. That target would be a new multiyear high.

The share price has pulled back about three percent from a recent 52-week high but is still more than 12 percent higher year-to-date. Over the past six months, the stock has underperformed Yahoo! (NASDAQ: YHOO) but outperformed the Nasdaq.

Groupon

This online local commerce marketplace saw short interest surge more than 47 percent in early March to 40.49 million shares, ending a six-period streak of falling short interest. The number of shares sold short jumped to almost 12 percent of the float, but days to cover was still less than two.

At the end of February, Groupon ousted CEO and founder Andrew Mason following disappointing quarterly results. The company currently has a market cap near $4 billion. While Groupon has a long-term EPS growth forecast of almost 22 percent, its return on equity is in negative territory.

Of the 24 polled analysts, only three of them recommend buying shares. 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 about 22 percent year to date, though with some volatility in the past month. Shares are trading almost 67 percent lower than where they were a year ago. However, the stock has outperformed Facebook and the broader markets over the past six months.

Posted-In: Angie's List EBAY Facebook Google Groupon LinkedInShort Ideas Trading Ideas Best of Benzinga

 

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