Short Interest In Facebook Falls, In Groupon Rises (FB, GRPN, ZNGA)
Among the social media companies based in the United States, Facebook (NASDAQ: FB), Groupon (NASDAQ: GRPN) and Zynga (NASDAQ: ZNGA) saw significant swings in short interest between the September 30 and October 15 settlement dates.
The number of shares sold short in Angie's List (NASDAQ: ANGI), eBay (NASDAQ: EBAY), Google (NASDAQ: GOOG), Pandora Media (NYSE: P), United Online (NASDAQ: UNTD) and Yelp (NYSE: YELP) decreased in that time.
In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu (NASDAQ: BIDU) and YouKu Todou (NYSE: YOKU) shrank in early October, while those in Renren (NYSE: RENN), Sina (NASDAQ: SINA) and Sohu.com (NASDAQ: SOHU) grew.
Below we take a quick look at how Facebook, Groupon and Zynga have fared and what analysts expect from them.
See also: Can Twitter Live Up To Its Pre-IPO Hype?
After falling more than 22 percent from the highest level of short interest so far this year, the number of shares sold short in this social networking giant totaled more 30.92 million in mid-October. That represented around two percent of Facebook's total float.
Facebook is expected to post annual revenue growth of more than 33 percent both this year and next. The company has a market capitalization of more than $127 billion. While its long-term earnings per share (EPS) growth forecast is about 30 percent, the price-to-earnings (P/E) ratio remains in the stratosphere.
Of the 40 analysts who follow the stock and were surveyed by Thomson/First Call, 13 rate the stock at Strong Buy and 16 others also recommend buying shares. But note that the mean price target, or where analysts expect the share price to go, is about the same as the current share price.
The share price has retreated more than four percent from an all-time high, but it is still more than 85 percent higher year-to-date. Over the past six months, the stock has outperformed the likes of AOL (NYSE: AOL), Google and Yahoo! (NASDAQ: YHOO).
This online local commerce marketplace saw short interest grow about 23 percent during the period to more than 30.19 million shares, which was the highest it has been since July. The number of shares sold short was about eight percent of the float, and the days to cover was less than two.
In October, Groupon hired an executive from Amazon.com (NASDAQ: AMZN). The company has a market cap more than $6 billion. While Groupon has a long-term EPS growth forecast of almost 26 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. However, the analysts' mean price target suggests there is potential upside of more than 18 percent. That consensus target is less than the 52-week high, though.
Note that the share price has dropped more than 17 percent in the past month, though it is still up more than 95 percent year-to-date. The stock has outperformed eBay and the broader markets over the past six months, but it has underperformed Facebook in that time.
Short interest in the San Francisco-based online social games operator rose almost 18 percent to around 34.55 million shares during the period. That was also the greatest number since July, and it represented more than six percent of Zynga's total float. The days to cover remained less than two.
Rumors swirled about impending layoffs at Zynga during the first two weeks of October. The company has a market cap of less than $3 billion. The long-term EPS growth forecast is about 30 percent, but note that the return on equity is in negative territory.
For at least three months, the analysts' consensus recommendation has been to hold shares of Zynga. It has more Underperform ratings than buy recommendations. Note also that the share price has overrun the analysts' mean price target. So, until price targets are raised, no upside potential is indicated.
The share price retreated more than six percent in the past month, though it is still up about 48 percent year-to-date. Over the past six months, the stock has underperformed not only Electronic Arts (NASDAQ: EA) and Facebook, but the Nasdaq as well.
At the time of this writing, the author had no position in the mentioned equities.
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