Groupon, Zynga Buck Social Media Short Interest (GRPN, LNKD, ZNGA)
Late February saw declining interest by short sellers in several social media companies based in the United States.
The number of shares short in eBay, Pandora Media and Yelp shrank by double-digit percentages between the February 14 and February 26 settlement dates. Short interest in Angie's List, Facebook, Google and Twitter declined more modestly. And in United Online, it was little changed from the previous settlement date.
In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Baidu, Renren, Sohu.com, YouKu Todou and YY fell in the latter weeks of the month, while short interest in Sina grew.
Below we take a quick look at how Groupn LinkedIn, and Zynga have fared and what analysts expect from them.
This online local commerce marketplace saw short interest grow about 44 percent during the period to more than 58.53 million shares, which was the highest it has been in the past year. The number of shares sold short was about 13 percent of the float, and the days to cover was a little more than one.
In February, Groupon warned that earnings will suffer as the company integrates recent acquisitions and boosts marketing spending. It has a market capitalization less than $6 billion. While Groupon has a long-term earnings per share (EPS) growth forecast of more than 26 percent, its return on equity is in the red.
The consensus recommendation of the analysts surveyed by Thomson/First Call has been to hold shares for at least the past three months. However, the analysts' mean price target suggests there is potential upside of about 23 percent. That consensus target is less than the 52-week high, though.
Note that the share price has dropped about 21 percent in the past month, falling below the 200-day moving average, though it is still up more than 57 percent year-over-year. The stock has underperformed eBay, Facebook and the broader markets over the past six months.
After swelling almost 38 percent in the previous period, short interest in this online professional network operator saw a gain of a little more than two percent in late February. Those 5.30 million shares short were the greatest number in the past year though, and it represented more than five percent of the float.
This Mountain View, California-based company launched its Chinese language site in late February. It has a market cap of more than $24 billion. The long-term EPS growth forecast is about 37 percent, but the price-to-earnings (P/E) ratio is much higher than the industry average.
Of the 38 analysts polled, 22 recommend buying shares, while the rest recommend holding them. The mean price target, or where analysts expect the share price to go, is almost 20 percent higher than the current share price. That consensus target is less than the 52-week high from back in September.
Shares rose more than six percent during the two-week period but have pulled more than two percent in the past week. The 50-day and 200-day moving averages recently formed a death cross. Over the past six months, the stock has underperformed Facebook , Google and the broader markets.
Short interest in the San Francisco-based online social games operator rose about eight percent to around 46.57 million shares during the period, or more than seven percent of the float. That was on top of a 45 percent gain in the previous period. It would take more than seven days to close out all of the short positions.
During the period, Zynga won dismissal of fraud lawsuit linked to initial public offering. The company has a market cap of about $5 billion. The long-term EPS growth forecast is about 30 percent, but note that the return on equity and operating margin are still in negative territory.
For at least three months, the analysts' consensus recommendation has been to hold shares of Zynga. The stock has more Underperform ratings than buy recommendations. Note also that the share price has overrun the analysts' mean price target. So, until price targets are raised, no upside potential is indicated.
The share price increased more than 17 percent in the past month and reached a new 52-week high on Tuesday. It is well above the 50-day moving average. Over the past six months, the stock has outperformed not only the likes of Electronic Arts and Facebook, but the Nasdaq as well.
At the time of this writing, the author had no position in the mentioned equities.
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