eBay, Groupon And Yelp See Rising Short Interest (EBAY, GRPN, YELP)

Among the internet companies based in the United States, eBay EBAY, Groupon GRPN and Yelp YELP saw the largest upswings in short interest in early May.

The number of shares short in Google(A shares), LinkedIn and Pandora Media grew more moderately between the April 30 and May 15 settlement dates.

Short sellers shied away from Angie's List, Facebook, Google(C shares), Shutterfly, Twitter, United Online and Zynga during the period.

In addition, note that the number of U.S.-listed shares (or ADRs) sold short of Chinese social media companies Renren, Sina and YouKu Todou declined in the first weeks of the month, while short interest in Baidu, Sohu.com and YY increased.

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eBay

Short interest in this San Jose, California-based online commerce company grew by more than 10 percent to nearly 16.54 million shares in early May. That ended a three-period streak of declining short interest, and it came to more than one percent of the float. The days to cover was more than one.

eBay has a market capitalization of more than $65 billion. It is expected to post double-digit revenue growth in the current quarter and the next. The long-term earnings per share (EPS) growth forecast is almost 13 percent. The operating margin is better than the industry average, but the return on equity is in the red.

Of the 40 analysts who follow the stock that were surveyed by Thomson/First Call, 25 recommend buying shares, 12 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is more than 16 percent higher than the current share price.

As of the close on Tuesday, shares had pulled back about three percent in the past month. The 50-day and 200-day moving averages appear poised to form a death cross. The stock has outperformed competitors Amazon.com and Overstock.com, as well as the Nasdaq, over the past six months.

Groupon

This online local commerce marketplace saw short interest rise about 14 percent during the period to around 61.90 million shares. That took back much of the 21 percent drop in the previous period. The number of shares sold short was more than 13 percent of the float, and the days to cover fell to less than three.

Groupon posted a higher quarterly earnings but a wider net loss during the period. The Chicago-based company now has a market capitalization of more than $4 billion. While Groupon has a long-term EPS growth forecast of more than 26 percent, its return on equity is 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.

Note that the share price is more than 10 percent lower than a month ago, and it hit a 52-week low in early May. It is well below the 200-day moving average. The stock has not only underperformed the likes of eBay and Facebook over the past six months, but the broader markets as well.

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Yelp

This San Francisco-based company saw its short interest surge more than 31 percent in the first weeks of May to more than 9.27 million shares, which represents more than 15 percent of the float. Note that the number of shares sold short has been rising since mid-March. The days to cover remained about one.

Yelp spread into Argentina during the period and launched a competitor to OpenTable. The San Francisco-based company has a market cap of more than $4 billion. Both its return on equity and operating margin are in the red. Despite a forecast for strong revenue growth for the current quarter, a net loss is also expected.

For at least three months, the consensus recommendation of the polled analysts has been to buy shares. Analysts seem to think the shares have plenty of room to run, as their mean price target is more than 23 percent higher than the current share price. Note that target is less than the 52-week high.

Also note that though shares have risen more than 10 percent in the past month, the share price is still down more than nine percent year to date. The 50-day and 200-day moving averages formed a death cross recently. The stock has outperformed Yahoo! but underperformed the broader markets over the past six months.

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

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