Tech Giants Seeing Wild Swings In Short Interest
Among the leading social media companies based in the United States, eBay Inc (NASDAQ: EBAY), Google Inc (NASDAQ: GOOGL)'s A shares and Groupon Inc (NASDAQ: GRPN) saw some of the wildest swings in short interest between the March 13 and March 30 settlement date.
After three periods in a row above 20 million, short interest in this San Jose, California-based online commerce company dropped more than 27 percent to almost 17.80 million shares in late March. That was less than 2 percent of the float and the days to cover slipped to less than two.
In March, eBay was downgraded by Piper Jaffray due to increasing competition.
Of the 42 analysts who follow the stock and were surveyed by Thomson/First Call, 20 recommend buying shares, with 10 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is less than 4 percent higher than the current share price.
Short sellers watched the share price retreat less than 3 percent during the two-week settlement period. Like the S&P 500, it is up about 2 percent year to date. eBay has underperformed competitors Amazon.com, Inc. (NASDAQ: AMZN) and Overstock.com (NASDAQ: OSTK), as well as the Nasdaq, over the past six months.
Short interest in Google's A shares surged almost 25 percent in the period to more than 3.85 million. That was the greatest number of shares short since last May, but still a little more than 1 percent of total float.
The consensus revenue forecast for Google calls for annual growth of more than 14 percent both this year and next.
Of the 48 analysts polled, 17 rate the stock at Strong Buy, and 22 others also recommend buying A shares. A move to the analysts' mean price target would be a gain of more than 12 percent from the most recent close.
That consensus price target would be a new multiyear high as well.
Like the Nasdaq, the A shares ended the two-week short interest period marginally higher. While the Nasdaq has continued to climb since, the share price slipped a bit. The stock has underperformed not only Facebook Inc (NASDAQ: FB) and Yahoo! Inc. (NASDAQ: YHOO) over the past six months, but the broader markets as well.
This online local commerce marketplace saw short interest retreat about 14 percent during the period to more than 59.26 million shares. That was the smallest number so far this year and less than 13 percent of the float.
At the daily average volume, it would take about nine days to cover all short positions.
A Wunderlich analyst's upgrade during the period failed to move the needle much. The Chicago-based company now has a market cap of nearly $5 billion. While Groupon has a long-term EPS growth forecast of more than 27 percent, its return on equity and operating margin are in negative territory.
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 28 percent.
That consensus target is much less than the 52-week high, though.
Short sellers watched shares pull back more than 7 percent during the short interest period, although it has recovered more than 2 percent since.
The stock has not only outperformed the likes of eBay and Facebook over the past six months, but the broader markets as well.
However, short sellers shied away from Google C shares, LinkedIn Corp (NYSE: LNKD), Pandora Media Inc (NYSE: P), Shutterfly, Inc. (NASDAQ: SFLY), United Online, Inc. (NASDAQ: UNTD) and Yelp Inc (NYSE: YELP) during the period.
In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Baidu Inc (NASDAQ: BIDU), Sohu.com Inc (NASDAQ: SOHU) and Youku Tudou Inc (NYSE: YOKU) grew in the final weeks of March, while short interest in Renren Inc (NYSE: RENN), SINA Corp (NASDAQ: SINA), Weibo Corp (NASDAQ: WB), and YY Inc (NASDAQ: YY) shrank.
At the time of this writing, the author had no position in the mentioned equities.
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