Facebook, Zynga Lead Shrinking Short Interest In Social Media (FB, P, ZNGA)
Among the social media companies based in the United States, short interest generally dwindled between the August 15 and August 30 settlement dates.
In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU), Sina (NASDAQ: SINA), Sohu.com (NASDAQ: SOHU) and YouKu Todou (NYSE: YOKU) also shrank, while those in Renren (NYSE: RENN) grew to the end of August.
Below we take a quick look at how Facebook, Pandora and Zynga have fared and what analysts expect from them.
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Shares sold short in this social networking giant decreased about 35 percent to about 23.51 million. That was the third consecutive period of decline, as well as the lowest level of short interest since January. It represented less than two percent of Facebook's total float.
Facebook is expected to post annual revenue growth of more than 30 percent both this year and next. 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 price-to-earnings (P/E) ratio remains in the stratosphere.
Of 39 analysts who follow the stock and were surveyed by Thomson/First Call, 11 rate the stock at Strong Buy, and 16 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 shares are trading near an all-time high after rising almost 18 percent in the past month. Over the past six months, the stock has underperformed the likes of AOL (NYSE: AOL), Google and Yahoo! (NASDAQ: YHOO), as well as the broader markets.
Short interest in this Internet radio service provider grew by more than 10 percent to around 28.48 million shares during the period, or more than 17 percent of the float. That ended four straight periods of declining short interest. But the days to cover fell to less than three for the first time this year.
Pandora just named a new chief executive officer. The Oakland, California-based company has a market cap of more than $3 billion, but it does not offer a dividend. While the long-term EPS growth forecast is about 45 percent, note that the return on equity and operating margins are in negative territory.
Of the 27 analysts surveyed, 16 recommend buying Pandora shares, six of them rating the stock at Strong Buy. Yet the analysts see no room for shares to run, as the mean price target is less than the current share price. The street-high price target indicates more than 14 percent potential upside, though.
Pandora's share price pulled back in the past month, but it is once again approaching the 52-week high. Over the past six months, the stock has outperformed competitor Sirius XM Radio (NASDAQ: SIRI), as well as the broader markets.
Short interest in this online social games operator dropped more than 22 percent to around 23.75 million shares during the period, on top of a 26 percent decline in the previous period. The number of shares sold short represented more than four percent of the float at the end of August. Days to cover was two.
In the middle of August, the new CEO announced a shakeup of upper management, including the departure of three executives. The San Francisco-based company has a market cap of more than $2 billion. The long-term EPS growth forecast is about 30 percent, but the return on equity is in the red.
Only one of the 23 polled analysts recommends buying shares, while four rate the stock at Underperform. Holding shares has been the consensus recommendation for at least three months. And the analysts' mean price target shows that they see only marginal upside potential.
The share price is up about two percent in the past month and is more than 25 percent higher than at the beginning of the year. Over the past six months, the stock has underperformed Electronic Arts (NASDAQ: EA) and Facebook, as well as the broader markets.
At the time of this writing, the author had no position in the mentioned equities.
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