Short Interest Rises in Facebook, Zynga (FB, YELP, ZNGA)
Among the social media companies based in the United States, Facebook (NASDAQ: FB), Yelp (NYSE: YELP) and Zynga (NASDAQ: ZNGA) saw the most significant upswings in short interest between the June 28 and July 15 settlement dates.
Also, note that U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU), Renren (NYSE: RENN) Sina (NASDAQ: SINA), Sohu.com (NASDAQ: SOHU) and YouKu Todou (NYSE: YOKU) grew to mid-July.
Shares sold short in this social networking giant increased about 10 percent to about 39.75 million. That was the highest level of short interest so far this year, and represented more than two percent of the float. Note that short interest has been rising since mid-May.
Facebook just posted blowout second-quarter results. The company has a market capitalization of around $80 billion. While its long-term earnings per share (EPS) growth forecast is more than 29 percent, the return on equity is less than three percent and the price-to-earnings (P/E) ratio is in the stratosphere.
Of 40 analysts who follow the stock and were surveyed by Thomson/First Call, 12 rate the stock at Strong Buy, and 15 others also recommend buying shares. But the share price has now overrun their mean price target. Until individual targets are raised, no further upside is indicated.
Facebook's share price jumped more than 25 percent following the earnings report. But the stock is still down more than five percent since the beginning of the year. Over the past six months, the stock has underperformed the likes of AOL (NYSE: AOL), Google and Yahoo! (NASDAQ: YHOO).
See also: Facebook Soars on Q2 Financial Results
This San Francisco-based company saw its short interest swell about 27 percent in the first weeks of July to about 5.99 million shares. That was the highest number of shares sold short in at least a year, and it represented about 21 percent of the total float. The days to cover increased to about four.
Yelp announced a food delivery service and expanded into the Czech Republic during the period. The company has a market cap near $2.6 billion. While Yelp has a long-term EPS growth forecast of about 20 percent, its return on equity is in negative territory. Note that analysts do not expect the company to show a profit until 2014.
For at least three months, the consensus recommendation of the polled analysts has been to hold shares. So, no surprise, the share price has overrun their mean price target, meaning they see no upside potential at this time. Note that the street-high target is about eight percent higher than the share price.
The share price has risen more than 28 percent in the past month and reached a 52-week high this week. It is up more than 85 percent from a year ago. The stock has outperformed Yahoo! and the broader markets over the past six months.
Short interest in the San Francisco-based online social games operator increased more than 16 percent to 30.51 million shares in the period. That was the second highest number of shares sold short so far this year, and it represented almost six percent of Zynga's total float.
Zynga's new CEO settled in in July, and the company's focus has turned to real money gambling. The company has a market cap of more than $2 billion, but it 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 23 surveyed analysts recommend buying shares, while 17 recommend holding them. Hold has been the consensus recommendation for at least three months. The current share price is higher than the analysts' mean price target, meaning they see no upside potential at this time.
The share price has climbed more than 19 percent in the past month and is up more than 37 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.
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