Short Sellers Pick Up Some Avon And GameStop (AVP, GME, ODP)
In the final two weeks of January, when it had become clear how the holiday shopping season had shaken out and the markets seemed to be undergoing a correction, Avon Products (NYSE: AVP),GameStop (NYSE: GME) and Office Depot (NYSE: ODP) saw significant upswings in short interest.
Other struggling U.S. retailers that saw the number of their shares sold short swell somewhat between the January 15 and January 31 settlement dates include Best Buy, Bebe Stores, J.C. Penney, Sears Holdings, SUPERVALU and Tuesday Morning.
Short interest in Aeropostale, RadioShack and Rite Aid was essentially unchanged from the previous period. And short sellers shied away from Barnes & Noble, HHGregg and Pacific Sunwear during the period.
Below is a quick look at how Avon Products, GameStop and Office Depot have fared and what analysts expect from them.
This beauty and personal care products purveyor saw short interest rise about 28 percent in late January to more than 15.18 million shares. That was more than three percent of the float, and the fifth consecutive period of rising short interest. The days to cover dropped to less than three.
Avon has a market capitalization of more than $6 billion and a dividend yield near 1.6 percent. Analysts see further revenue declines in the current quarter and for all of 2014. The long-term earnings per share (EPS) growth forecast is more than 12 percent, but the return on equity is in the red.
The consensus recommendation of the analysts who follow the stock and were surveyed by Thomson/First Call is to hold Avon shares, down from a consensus buy recommendation three months ago. Their mean price target, or where they expect the share price to go, is about 24 percent higher than the current share price.
The share price is up more than three percent in the past week, after sinking to a 52-week low in early February. The stock has underperformed competitors Procter & Gamble, Estee Lauder and Revlon over the past six months, as well as the broader markets.
Short interest in this Grapevine, Texas-based specialty retailer grew more than 25 percent in the period to more than 35.67 million shares. That represented more than 31 percent of the float and was the greatest number of shares short since last April. Days to cover jumped from about four to almost seven.
GameStop shares were crushed in January due to disappointing holiday sales of software. The video game retailer has a market cap of more than $4 billion and a dividend yield near 3.1 percent. The long-term EPS growth forecast is more than 14 percent, and the return on equity is almost 18 percent.
The consensus recommendation of the analysts surveyed remains to buy GameStop shares, though enthusiasm for the stock has cooled. The mean price target suggests that the analysts see more than 32 percent potential upside in the next year. That target is less than the 52-week high, though.
The share price pulled back more than 19 percent in the past month, but it is still about 55 percent higher than the 52-week low. Over the past six months, the stock has not only underperformed the broader markets, but the likes of Amazon.com, Best Buy and Walmart as well.
See also: Big Moves In Social Media Short Interest
The short interest in this specialty retailer grew more than 16 percent to around 34.04 million shares by the end of the month, or more than six percent of the total float. That ended a three-period retreat in the number of shares short. It would take more than two days to close out all short positions.
This Boca Raton, Florida-based company is expected to post revenue growth of more than 50 percent for both the most recent quarter and the current one. Its market cap is less than $2 billion. Its price-to-earnings (P/E) ratio is higher than the industry average, and the return on equity is less than three percent.
For the past three months, the consensus recommendation of analysts has been to hold shares. Yet their mean price target suggests upside potential of more than 17 percent. The most optimistic analyst believes there may be more than 35 percent upside, to a level shares have not seen since 2010.
The share price has increased almost eight percent in the past month, rising above the 50-day moving average, but it is still down more than three percent year to date. The stock has outperformed not only competitors Staples and Walmart over the past six months, but the S&P 500 as well.
At the time of this writing, the author had no position in the mentioned equities.
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