Market Overview

Short Interest In Express Scripts And Lowe's Doubles

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Short Interest In Express Scripts And Lowe's Doubles
  • Short interest in a number of stocks surged in the most recent settlement period.
  • A pharmacy benefit management company and a big-box retailer led that trend in late February.
  • Shares of both of them rose in the period as the markets found their footing.

As the markets seem to find their footing in late February and many stocks finally started to head north again, what caught the eye of short sellers? Express Scripts Holding Company (NASDAQ: ESRX) and Lowe's Companies, Inc. (NYSE: LOW) each saw the number of their shares sold short more than double between the February 12 and February 29 settlement dates. They also both reported quarterly results in that period.

Of course they were not alone in seeing a short interest surge in the final weeks of the month. Others include Activision Blizzard, Brocade Communications, Encana, Energy Transfer Partners, Marathon Oil and Starwood Hotels. On the other hand, short sellers fled from the likes of ADT, Fortinet, Pan American Silver and UBS in that time.

Here we take a quick look at how Express Scripts and Lowe's have fared recently and what analysts expect from them.

Express Scripts

This pharmacy benefit management company saw its short interest spike more than 138 percent to more than 56.61 million shares, or 8.5 percent of float, in the final weeks of the month. That was the greatest number of shares short since last September. It would take more than 12 days to cover all short positions.

Deutsche Bank downgraded Express Scripts after earnings due to its squabbles with Anthem, its largest client. The consensus analyst recommendation is still to hold the shares. A move to their mean price target would be a gain of almost 17 percent for the stock, but that is less than the 52-week high.

Short sellers watched the shares rise more than 4 percent during the two-week short interest period, compared to a gain of less than 3 percent in the Nasdaq. However, the stock has dropped around 2 percent since then, and it is still down almost 22 percent since the beginning of the year.

Related Link: Whitney Tilson Shorts Lumber Liquidators Again, Says Co. Has 50% Chance Of Bankruptcy

Lowe's

The number of shares sold short in this big-box home improvement retailer jumped about 124 percent during the two weeks to nearly 13.44 million. While that was just 1.5 percent of the total float, it was also by far the highest level of short interest year to date. The days to cover rose to more than two.

Late in the period, Lowe's reported solid fourth-quarter results, buoyed in part by warm weather and a healthy housing market. The consensus analyst recommendation remains to buy the shares. Note that their mean price target suggests that they now see more than 15 percent upside potential.

During the settlement period, shares rose about 9 percent, only to retreat – even before the earnings report – and end the two weeks up less than 3 percent. They narrowly beat S&P 500 in that time. They have climbed more than 2 percent more since, but the stock is still down less than 3 percent year to date.

At the time of this writing, the author had no position in the mentioned equities.

Image Credit: Public Domain

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