Market Overview

Short Sellers Retreat from GameStop, Rite Aid (AVP, GME, RAD)

Overall, the short interest moves in troubled retail companies were mixed again during the latter weeks of June.

Avon Products (NYSE: AVP), GameStop (NYSE: GME) and Rite Aid (NYSE: RAD) saw the number of their shares sold short decrease by more than 10 percent.

Short sellers also shied away from Barnes & Noble (NYSE: BKS), Best Buy (NYSE: BBY), Bon-Ton Stores (NASDAQ: BONT) and SuperValu (NYSE: SVU) between the June 14 and June 28 settlement dates.

But the short interest in J.C. Penney (NYSE: JCP), Office Depot (NYSE: ODP), Pacific Sunwear (NASDAQ: PSUN) and RadioShack (NYSE: RSH) was essentially flat compared to the previous period.

And the number of shares sold short in Bebe Stores (NASDAQ: BEBE), OfficeMax (NYSE: OMX) and Sears Holdings (NASDAQ: SHLD) increased somewhat in that time.

Here is a quick look at how Avon Products, GameStop and Rite Aid have fared and what analysts expect from them.

Avon Products

This beauty and personal care products purveyor saw short interest decline about 10 percent in the latter weeks of the month to around 8.80 million shares. The number of shares sold short was about two percent of the total float, and days to cover fell to less than two for the first time since April.

Avon has a market capitalization of more than $9 billion and a dividend yield near 1.1 percent. The consensus forecast for the current quarter calls for year-over-year growth in earnings per share (EPS) but flat revenues. The long-term EPS growth forecast is more than 24 percent, but the return on equity is in negative territory.

Of the 16 analysts who follow the stock that were surveyed by Thomson/First Call, just six recommend buying shares; the rest recommend holding them. Their mean price target, or where they expect the share price to go, is about 12 higher than the current share price. That target would be a new 52-week high.

The share price pulled back about eight percent during the period, but it is now up about 50 percent year-to-date. The stock has outperformed competitor Procter & Gamble (NYSE: PG) and the S&P 500 over the past six months, but it underperformed Revlon (NYSE: REV).

GameStop

Short interest in this Grapevine, Texas-based specialty retailer dropped more than 17 percent to more than 28.95 million shares, the lowest number of shares sold short in it the past year. It represented more than 25 percent of the float. Days to cover rose to about eight.

GameStop rallied after Microsoft (NASDAQ: MSFT) capitulated on the rental of Xbox One games. The video game retailer has a market cap of about $5 billion and a dividend yield near 2.6 percent. The long-term EPS growth forecast is more than 13 percent, but the return on equity is in the red.

The consensus recommendation of the analysts surveyed is to buy GameStop shares, and it has been for at least three months. But the share price has overrun their mean price target, though the most optimistic individual price target suggests there is about 21 percent potential upside.

The share price is up about 15 percent from a month ago, after reaching a multiyear high last week. Over the past six months, the stock has outperformed the likes of Amazon.com (NASDAQ: AMZN) and Wal-Mart (NYSE: WMT), as well as the broader markets.

Rite Aid

Shares sold short in this drugstore operator fell about 15 percent in the period to around 36.73 million, on the highest average daily volume so far this year. Shares sold short represented more than four percent of the float, but the days to cover is only one.

Rite Aid has more the 4,600 stores, and the COO was promoted to president in June. The company's market cap is more than $2.0 billion. Its long-term EPS growth forecast is about eight percent, and its price-to-earnings (P/E) ratio is less than the industry average. Here too the return on equity is in the red.

Half of the eight analysts polled recommend buying shares, and the other four recommend holding them. Analysts see little upside potential, as their mean price is only marginally higher than the current share price. However, the street-high target suggests there is about 20 percent potential upside.

The share price has retreated about 11 percent in the past month. But it is still about 100 percent higher than at the beginning of the year. The stock has outperformed competitors CVS Caremark (NYSE: CVS) and Walgreen (NYSE: WAG), as well as the S&P 500, over the past six months.

Posted-In: Amazon.com Avon Products Barnes & Noble bebe Stores best buy Bon-Ton StoresShort Ideas Trading Ideas Best of Benzinga

 

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