Short Interest in Groupon, Twitter On The Rise (GRPN, TWTR, ZNGA)
While late March saw falling interest by short sellers in a number of social media companies based in the United States, Groupon (NASDAQ: GRPN), Twitter (NYSE: TWTR) and Zynga (NASDAQ: ZNGA) had significant short interest gains.
The number of shares short in Angie's List, eBay, Google, LinkedIn and Pandora Media decreased between the March 14 and March 31 settlement dates. However, rising short interest was also seen in Facebook, Shutterfly, United Online and Yelp in the period.
In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Renren, Sina and YouKu Todou fell in the final weeks of the month, while short interest in Baidu, Sohu.com and YY grew.
Below we take a quick look at how Groupon, Twitter and Zynga have fared and what analysts expect from them.
See also: Short Interest Rises As Biotechs Fall
This online local commerce marketplace saw short interest grow more than 17 percent during the period to more than 86.78 million shares, or more than double the number of shares short in mid-February. The end-of-March figure was about 19 percent of the float. The days to cover was more than five.
Groupon is expected to post double-digit revenue growth in the current quarter and the next. It has a market capitalization less than $5 billion. While Groupon has a long-term EPS growth forecast of more than 26 percent, its operating margin is less than the industry average.
The consensus recommendation of the analysts surveyed by Thomson/First Call 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 36 percent. But note that their consensus target is less than the 52-week high.
Shares have retreated more than 11 percent in the past month, and the share price is more than 37 percent lower year to date. The 50-day and 200-day moving averages recently formed a death cross. The stock has underperformed eBay, Facebook and the broader markets over the past six months.
Short interest in this micro-blogging service provider has grown in almost every period since its highly anticipated initial public offering last November. The 45.76 million shares short at the end of March represents less than 18 percent of the float. But the days to cover dropped to around four.
Analysts still expect Twitter to book more than $1 billion in revenue for 2014 but to be barely profitable. The San Francisco-based company has a market cap of more than $23 billion. Note that the return on equity and the operating margin are both in negative territory.
Only six of the 30 analysts surveyed recommend buying Twitter shares. For at least three months the consensus recommendation has been to hold shares. The analysts' mean price target is about 19 percent higher than the current share price, but that is well less than the post-IPO high.
Twitter's share price has pulled back more than 21 percent in the past month. It is even down more than five percent from its IPO. In that time, the stock has underperformed Facebook, Google, the Nasdaq and the S&P 500. However, the stock outperformed LinkedIn.
See also: Are Facebook Shares Back on Track?
Short interest in the San Francisco-based online social games operator rose more than nine percent to around 53.25 million shares, or about nine percent of the float. That was the fourth consecutive period of rising short interest. But it would take less than two days to close out all of the short positions.
During the period, competitor King Digital had a soft IPO, but still ended up valued higher than Zynga, which now has a market cap of less 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. A move to the analysts' mean price target would be a gain of less than six percent for shareholders.
The share price has pulled back about 21 percent in the past month, but it is still more than 10 percent higher than at the beginning of the year. Over the past six months, the stock has outperformed not only competitors such as 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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