Market Overview

Short Interest in Social Media Stocks on the Rise (ANGI, GOOG, ZNGA)

Among the social media players, Angie's List (NASDAQ: ANGI), Google (NASDAQ: GOOG) and Zynga (NASDAQ: ZNGA) saw the most significant upswings in short interest between the May 31 and June 14 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), Facebook (NASDAQ: FB), Groupon (NASDAQ: GRPN), LinkedIn (NYSE: LNKD), Pandora (NYSE: P) and United Online (NASDAQ: UNTD).

But short interest in Shutterfly (NASDAQ: SFLY) and Yelp (NYSE: YELP) was essentially flat in the first two weeks of June, compared to the previous period.

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

Angie's List

Short interest in this Indianapolis-based operator of online review sites increased about 16 percent to 9.73 million shares in the early weeks of June. That was the highest number of shares sold short so far this year and was about 24 percent of the float. The days to cover fell from about 17 to about 13.

In early June, BusinessWeek featured a potential rival to Angie's List, a startup called Thumbtack. Angie's List now has a market capitalization of about $1.5 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 current share price has overrun the mean price target, which is where analysts expect the share price to go, meaning they see no upside potential at this time.

Shares reached a new 52-week high today, and the share price is about 124 percent higher than at the beginning of the year. Over the past six months, the stock has outperformed Yelp, as well as the Nasdaq and the S&P 500.

Google

Short interest in this Mountain View, California-based operator of Google+ and YouTube rose more than 13 percent in the period to 4.26 million shares, taking back some of a 22 percent decline in the previous period. That was less than two percent of the float, and the days to cover remains less than two.

The company has a market cap of around $293 billion but does not offer a dividend. It has a long-term EPS growth forecast of almost 15 percent, though its P/E ratio is greater than the industry average. Google's operating margin also is higher than the industry average, and its return on equity is about 16 percent.

Of the 40 surveyed analysts, 28 recommend buying shares, with nine of them rating the stock at Strong Buy. They believe the shares have some headroom, as the mean price target is about seven percent higher than the current share price. That target would be a new multiyear high.

The share price has retreated more than four percent from a recent multiyear high, but it is still almost 21 percent higher year-to-date. The stock has underperformed Yahoo! (NASDAQ: YHOO) but outperformed AOL (NYSE: AOL), Facebook and the broader markets over the past six months.

Zynga

Short interest in the San Francisco-based online social games operator increased more than 16 percent, to 24.98 million shares in the first two weeks of June. That reversed a three-period decline in the number of shares sold short, and it represented less than five percent of the Zynga's float.

In early June, Zynga announced layoffs and office closings in New York, Los Angeles and Dallas. Zynga has a market cap of more than $2 billion but does not offer a dividend. 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 two of the 22 surveyed analysts recommend buying shares, while 17 recommend holding them. Their mean price target represents more than 16 percent potential upside, relative to the current share price. But that target is well below the 52-week high from about a year ago.

The share price has retreated more than 17 percent in the past month but is still up about 17 percent year-to-date. Over the past six months, the stock has underperformed the likes of Electronic Arts (NASDAQ: EA), but it has outperformed Facebook and the broader markets.

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

 

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