Market Overview

Short Sellers Retreat from Groupon, Zynga

Among the social media players, Angie's List (NASDAQ: ANGI), Groupon (NASDAQ: GRPN) and Zynga (NASDAQ: ZNGA) saw the biggest swings in short interest between the April 30 and May 15 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 eBay (NASDAQ: EBAY), Google (NASDAQ: GOOG), LinkedIn (NYSE: LNKD), Shutterfly(NASDAQ: SFLY), United Online (NASDAQ: UNTD) and Yelp (NYSE: YELP).

But short sellers shied away from Facebook (NASDAQ: FB) and Pandora (NYSE: P) in the first two weeks of May.

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

Angie's List

Short interest in this Indianapolis-based operator of online review sites jumped about 31 percent to 9.46 million shares in the early weeks of May, on the second highest average daily volume year-to-date. That was the highest number of shares sold short since December and was more than 24 percent of the float.

In early May, an analyst defended Angie's List after a critical research report was released and the share price dropped. The company now has a market capitalization of about $1.3 billion. The long-term earnings per share (EPS) growth forecast is about 46 percent, though the return on equity is in negative territory.

The consensus recommendation of the analysts who follow the stock and were surveyed by Thomson/First Call is too buy shares. The mean price target, or where analysts expect the share price to go, is about 10 percent higher than the current share price. But that target is less than the 52-week high reached back in April.

The share price is only more than 99 percent higher than at the beginning of the year, despite pulling back more than seven percent in the past two weeks. Over the past six months, the stock has outperformed the Nasdaq and the S&P 500.

Groupon

This online local commerce marketplace saw short interest retreat about 21 percent in early May to 34.58 million shares, which was the lowest it has been since last June. The number of shares sold short fell to about eight percent of the float, and the days to cover was a bit more than one.

In May, Groupon posted strong first-quarter results and formed a committee to find a new CEO. The company currently has a market cap near $5 billion. While Groupon has a long-term EPS growth forecast of more than 24 percent, its PEG ratio is higher than the industry average and the return on equity is in the red.

The consensus recommendation of the polled analysts has been to hold shares for at least the past three months. The share price has outrun the analysts' mean price target, meaning the consensus is that there is no potential upside at this time. However, the street-high target suggests more than 29 percent upside.

The share price has risen more than 45 percent year-to-date and hit a nine-month high today. The stock has outperformed eBay and Facebook, as well as the broader markets, over the past six months.

Zynga

Short interest in the San Francisco-based online social games operator pulled back more than 33 percent to 22.20 million shares. That was the lowest level of short interest since January. The number of shares sold short represented about four percent of the float. But days to cover was about one.

At the beginning of May, Zynga announced it would launch a learning games accelerator. In mid-May, Jana Partners revealed it had taken a stake in the company. Zynga currently has a market cap of about $2.7 billion. Its long-term EPS growth forecast is about 21 percent, but the return on equity is in the red.

The consensus recommendation of the surveyed analysts is to hold shares of Zynga. While their mean price target is more than 12 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 almost 42 percent year to date, though it has faced resistance around $3.50 since mid-March. Over the past six months, the stock has outperformed Facebook, though it has underperformed the likes of Electronic Arts (NASDAQ: EA), as well as the broader markets.

Posted-In: Angie's List EBAY electronic arts Facebook Google GrouponShort Ideas Trading Ideas Best of Benzinga

 

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