Short Sellers Place Their Holiday Retail Bets (AVP, BBY, GME)
In the first two weeks of December, the heart of the holiday shopping season, Avon Products (NYSE: AVP), Best Buy (NYSE: BBY) and GameStop (NYSE: GME) saw the largest swings in short interest among struggling U.S. retailers.
Others that saw the number of their shares sold short swell somewhat between the November 29 and December 13 settlement dates include Bebe Stores, J.C. Penney, RadioShack and Rite Aid. Short interest in SUPERVALU was essentially unchanged from the previous period.
In addition, short sellers shied away from Bon-Ton Stores, Pacific Sunwear and Sears Holdings during the period. But short interest in Barnes & Noble and Office Depot dropped by double-digit percentages.
See also: Short Sellers Pile On Twitter
Below is a quick look at how Avon Products, RadioShack and GameStop have fared and what analysts expect from them.
This beauty and personal care products purveyor saw short interest rise about 12 percent in early December to more than 11.32 million shares. That took back some of a decline of 20 percent in the previous period, and it was more than two percent of the float. The days to cover remained near three.
In December, Avon halted the roll out of a new order management system and cut 650 jobs. The company has a market capitalization of more than $7 billion and a dividend yield near 1.4 percent. The long-term earnings per share (EPS) growth forecast is more than 14 percent, but the return on equity is in the red.
Of the 13 analysts who follow the stock that were surveyed by Thomson/First Call, four rate Avon at Strong Buy, and another three also recommend buying shares. Their mean price target, or where they expect the share price to go, is almost 14 percent higher than the current share price.
The share price has pulled back less than three percent in the past month, though it is still up more than 15 percent year to date. The stock has underperformed the likes of Procter & Gamble and Revlon over the past six months, as well as the broader markets.
The short interest in this specialty retailer grew more than 14 percent to more than 24.27 million shares by mid-December, or almost nine percent of the total float. That was on top of a more than 30 percent rise in the previous period. Days to cover rose to about five for the first time since September.
Best Buy was seen as one of the Black Friday winners, but analysts still expect a decline in sales in the next quarterly report. It has a market cap of almost $14 billion and a dividend yield near 1.7 percent. The long-term EPS growth forecast is less than seven percent. Here too the return on equity is in the red.
Fourteen of the 23 analysts surveyed recommend buying Best Buy shares. They see some headroom for the stock as their mean price target is more than 13 percent higher than the current share price. Shares have not traded at that level since April of 2010.
Shares have traded mostly between $40 and $42 since Black Friday. However, the share price is still about 47 percent higher than six months ago. In that time, the stock has outperformed competitors Amazon.com and Walmart, as well as the broader markets.
Short interest in this Grapevine, Texas-based specialty retailer grew more than 17 percent in the period to more than 23.10 million shares. That represented more than 20 percent of the float and was the greatest number of shares short since July. Days to cover rose to more than five.
GameStop was looking for a holiday sales boost from the release of new PlayStation and Xbox consoles. The video game retailer has a market cap of more than $5 billion and a dividend yield near 2.2 percent. The long-term EPS growth forecast is more than 15 percent, and the return on equity is almost 18 percent.
The consensus recommendation of the analysts surveyed is to buy GameStop shares, and it has been for at least three months. Their mean price target suggests that the analysts see more than 18 percent potential upside in the next year. That target would be a new multiyear high.
The share price pulled back more than 14 percent in late November but has begun to recover. It is still up about 91 percent year to date. Over the past six months, the stock has underperformed the likes of Amazon.com and Best Buy, but it has outperformed Walmart and the S&P 500.
At the time of this writing, the author had no position in the mentioned equities.
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