Facebook and Google Buck Short Interest Trend (FB, GOOGL, YELP)
While early April saw falling interest by short sellers in many of the social media companies based in the United States, Facebook (NASDAQ: FB), Google (NASDAQ: GOOGL) and Yelp (NYSE: YELP) stood out for their significant short interest gains.
However, the number of shares short in Groupon, LinkedIn and Zynga decreased by double-digit percentages between the March 31 and April 15 settlement dates. Angie's List, eBay, Pandora Media and Shutterfly also saw their short interest decline.
Rising short interest also was seen in Twitter and United Online in the period.
In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Sina and Sohu.com and fell in the first weeks of the month, while short interest in Baidu, Renren, YouKu Todou and YY grew.
Below we take a quick look at how Facebook, Google and Yelp have fared and what analysts expect from them.
Shares sold short in this social networking giant increased more than 10 percent to around 45.43 million in the period, or more than two percent of the total float. That was the third consecutive period of rising short interest, as well as the greatest number of shares sold short in the past year.
Facebook is expected to post annual revenue growth of more than 31 percent both this year and next. The company has a market capitalization of about $147 billion. While its long-term earnings per share (EPS) growth forecast is more than 31 percent, the price-to-earnings (P/E) ratio remains very high.
Of 44 analysts who follow the stock and were surveyed by Thomson/First Call, 16 rate the stock at Strong Buy, and 21 others also recommend buying shares. Their mean price target, or where analysts expect the share price to go, is more than 25 percent higher than the current share price.
Facebook shares have traded mostly between $57 and $64 in the past month and faced resistance from the 50-day moving average in that time. The stock is up less than six percent year to date. But over the past six months, it has outperformed the likes of Google and Twitter, as well as the broader markets.
Short interest in this Mountain View, California-based operator of Google+ and YouTube jumped more than 23 percent early in the month to more than 2.95 million shares. That was a little more than one percent of the total float, and it ended a seven-period streak of dwindling short interest.
The Google stock split occurred during the period. The company has a market cap near $350 billion but does not offer a dividend. It has a long-term EPS growth forecast of almost 16 percent, though its P/E ratio is greater than the industry average. Google's operating margin also is higher than the industry average.
Of the 44 surveyed analysts, 35 recommend buying shares, with 13 of them rating the stock at Strong Buy. They believe the shares have plenty of headroom, as the mean price target is almost 21 percent higher than the current share price. That target would be a new multiyear high.
The share price has retreated more than seven percent in the past month and is in danger of dropping below the 200-day moving average. The stock has underperformed not only AOL, Facebook and Yahoo! over the past six months, but the Nasdaq and the S&P 500 as well.
See also: 5 Companies That Apple Should Buy
This San Francisco-based company saw its short interest grow more than 14 percent in the first weeks of April to almost 6.28 million shares, which represents more than 10 percent of the float. Note that the number of shares sold short had fallen in the previous two periods. The days to cover remained at less than two.
Yelp launched Yelp Japan during the period, extending service to a second Asian country. The company has a market cap a little more than $4 billion. While Yelp has a long-term EPS growth forecast of about 54 percent, its return on equity and operating margin are in negative territory.
For at least three months, the consensus recommendation of the polled analysts has been to buy shares. They seem to think the shares have plenty of room to run, as their mean price target is more than 36 percent higher than the current share price. Note that target is less than the 52-week high.
Also note that shares have tumbled more than 35 percent in the past six weeks and ended last week near a six-month low. The share price is about ten bucks less than the 200-day moving average. The stock has underperformed Yahoo! and the broader markets over the past six months.
At the time of this writing, the author had no position in the mentioned equities.
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