Short Interest In Social Media On The Rise (EBAY, GRPN, ZNGA)
Early March saw rising interest by short sellers in several social media companies based in the United States.
More modest short interest gains were seen in Facebook, Pandora Media and Twitter, while in Google and Yelp it was little changed from the previous settlement date.
On the other hand, the number of shares short in Angie's List, LinkedIn, Shutterfly and United Online shrank between the February 28 and March 14 settlement dates.
In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Sohu.com, YouKu Todou and YY fell in the early weeks of the month, while short interest in Baidu, Renren and Sina grew.
Below we take a quick look at how eBay, Groupon and Zynga have fared and what analysts expect from them.
Short interest in this San Jose, California-based online commerce company grew by about 19 percent to about 20.40 million shares in early March. That took back some of the decline in the previous period, and it came to less than two percent of the float. Days to cover increased to two.
eBay has a market capitalization of almost $72 billion. It is expected to post double-digit revenue growth in the current quarter and the next. The long-term earnings per share (EPS) growth forecast is more than 14 percent, but the price-to-earnings (P/E) ratio is greater than the industry average.
Of the 40 analysts who follow the stock that were surveyed by Thomson/First Call, 27 recommend buying shares, 12 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is more than 10 percent higher than the current share price.
The share price is almost five percent higher year to date, after retreating almost four percent from a recent multiyear high. The stock has underperformed competitor Amazon.com and the S&P 500 but outperformed Overstock.com over the past six months.
This online local commerce marketplace saw short interest surge more than 26 percent during the period to more than 73.83 million shares, the highest it has been in the past year. The number of shares sold short represents more than 16 percent of the float, and the days to cover jumped to four.
Groupon also is expected to post double-digit revenue growth in the current quarter and the next. It has a market cap more than $5 billion. While Groupon has a long-term EPS growth forecast of more than 26 percent, its return on equity is in the red and its operating margin is less than the industry average.
The consensus recommendation of the analysts surveyed 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 27 percent. But note that their consensus target is less than the 52-week high.
Shares have traded mostly between $8.00 and $8.50 for the past month, but the share price is down more than 31 percent year to date. The 50-day and 200-day moving averages formed a death cross last week. The stock has underperformed eBay, Facebook and the broader markets over the past six months.
Short interest in the San Francisco-based online social games operator rose more than 14 percent to around 53.25 million shares during the period, or more than eight percent of the float. That was on top of an eight percent gain in the previous period. It would take less than two days to close out all of the short positions.
During the period, Zynga announced plans for new mobile versions of its most popular games. The company has a market cap of more than $4 billion. The long-term EPS growth forecast is about 30 percent, but note that the return on equity and operating margin are still in negative territory.
For at least three months, the analysts' consensus recommendation has been to hold shares of Zynga. The stock has more Underperform ratings than buy recommendations. Note also that the share price is higher than the analysts' mean price target. Until price targets are raised, no upside potential is indicated.
The share price has pulled back about 15 percent in the past two weeks, but it is well above the 50-day moving average, as well as about 19 percent higher year to date. Over the past six months, the stock has outperformed not only the likes of Electronic Arts and Activision Blizzard, but the Nasdaq as well.
At the time of this writing, the author had no position in the mentioned equities.
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