Market Overview

Short Sellers End The Year With Facebook And Twitter (FB, LNKD, TWTR)

Short Sellers End The Year With Facebook And Twitter FB, LNKD, TWTR

Among the social media companies based in the United States, short sellers were particularly attracted to Facebook (NASDAQ: FB) and Twitter (NYSE: TWTR) as 2013 wound to a close.

The number of shares sold short in and Shutterfly and United Online also increased somewhat between the December 13 and December 31 settlement dates.

However, LinkedIn (NYSE: LNKD) saw a sizable decline in short interest during the period. Short sellers also shied away from Angie's List, eBay, Google, Groupon, LinkedIn, Pandora Media, Yelp and Zynga.

In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu, Renren, Sina and YouKu Todou shrank in late December.

Below we take a quick look at how Facebook, LinkedIn and Twitter have fared and what analysts expect from them.

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The number of shares sold short in this social networking giant rose more than 30 percent in the period to more than 41.70 million, or more than two percent of the total float. That reversed a similar decline in the previous period, and it was the second greatest level of short interest in the past year.

Facebook is expected to post annual revenue growth of more than 35 percent for both last year and this one. The company has a market capitalization of more than $142 billion. While its long-term earnings per share (EPS) growth forecast is more than 32 percent, the price-to-earnings (P/E) ratio remains very high.

Of 40 analysts who follow the stock and were surveyed by Thomson/First Call, 12 rate the stock at Strong Buy and 15 others also recommend buying shares. But their mean price target, or where analysts expect the share price to go, is much less than the current share price.

Facebook shares are trading near an all-time high after rising more than 17 percent in the past month. Over the past six months, the stock has outperformed the likes of AOL, Google and Yahoo! And it outperformed the broader markets in that time as well.


Short interest in this online professional network operator shrank more than 24 percent to more than 2.84 million shares in the final two weeks of the month. That represented less than three percent of the float. The number of shares sold short has been falling since mid-November. Days to cover was about two.

In late December, a poll showed that LinkedIn was more popular than Twitter. The Mountain View, California-based company has a market cap of more than $26 billion. The long-term EPS growth forecast is about 54 percent, but the P/E ratio is much higher than the industry average and the return on equity is less than three percent.

Twenty of the 34 surveyed analysts recommend buying shares, while the rest recommend holding them. The mean price target is more than 17 percent higher than current share price and would be a new 52-week high. At least one analyst sees LinkedIn reaching $300 a share.

Shares popped more than six percent in the past week, reversing a recent slide. The share price is more than 85 percent higher than a year ago. Over the past six months, though, the stock has underperformed Facebook, Google and the S&P 500.


Short interest in this microblogging service provider grew by about 24 percent in the fourth reporting period since its highly anticipated initial public offering. The approximately 29.37 million shares sold short represents more than 13 percent of the float, the highest level of short interest so far.

The Twitter rally peaked during the period, as investors increasingly began to see the stock as overvalued. The San Francisco-based company has a market cap of about $31 billion. While the long-term EPS growth forecast is about 20 percent and the return on equity is more than 115 percent, note that the operating margin is in the red.

The consensus recommendation of the 25 analysts surveyed is to hold Twitter shares. The analysts see no room for shares to run, as the mean price target is still much less than the current share price, even after the recent drop off in the latter.

Twitter's share price has pulled back more than 22 percent since the post-IPO high just after Christmas. Still, the stock has outperformed not only the likes of Facebook and LinkedIn since coming public, but the Nasdaq and the S&P 500 as well.

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

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Posted-In: Angie's List AOL EBAY Facebook Google GrouponShort Ideas Trading Ideas Best of Benzinga


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