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Short Sellers Like eBay, Pandora And Twitter Right Now

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July 14, 2014 12:33 pm
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Among the leading social media companies based in the United States, eBay (NASDAQ: EBAY), Pandora Media (NYSE: P) and Twitter (NYSE: TWTR) saw significant upswings in short interest in late June.

The number of shares short in Angie’s List, Groupon, LinkedIn, United Online and Yelp also grew between the June 13 and June 30 settlement dates. But short sellers shied away from Facebook, Google (class A), Shutterfly and Zynga during the period.

In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media company Youku Todou increased in the final weeks of the month, but short interest in Baidu, Renren, Sina, Sohu.com and YY declined.

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

See also: What Will Facebook Do After Its Most-Talked About Event Ends?

eBay

Short interest in this San Jose, California-based online commerce company grew by more than 15 percent to nearly 21.80 million shares in late June. That was the highest number of shares short since February, and it came to nearly two percent of the float. The days to cover was about two.

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 more than 12 percent. The operating margin is better than the industry average, but the return on equity is in the red.

Of the 39 analysts who follow the stock that were surveyed by Thomson/First Call, 25 recommend buying shares, with 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 15 percent higher than the current share price.

As of the close on Friday, shares were down more than four percent year to date. The share price declined about two percent during the short interest period. The stock has outperformed competitors Amazon.com and Overstock.com, but underperformed the Nasdaq, over the past six months.

Pandora Media

Short interest in this Internet radio service provider rose about 17 percent. The 20.40 million shares short at the end of the month represent more than 10 percent of the float, and it was the highest level of short interest this year. It would take almost three days to cover all short positions.

Amazon became a competitor when it announced its own streaming music service earlier this month. Oakland, California-based Pandora has a market cap of more than $5 billion. Its long-term EPS growth forecast is almost 41 percent, but both its operating margin and return on equity are in the red.

Of the 31 analysts polled, seven rate the stock at Strong Buy and 15 more also recommend buying shares. A move to the analysts’ mean price target would be a gain of more than 23 percent for the shares. But they have traded higher than that consensus target as recently as March.

Short sellers watched Pandora’s share price rise more than nine percent in the final weeks of the month, and it has retreated more than 11 percent since then. Over the past six months, the stock has outperformed not only the Nasdaq and the S&P 500, but Sirius XM as well.

See also: Is Twitter Becoming A Shopping App?

Twitter

Short interest in this micro-blogging service provider has grown in the past two periods to around 34.50 million. That is less than the 50 million post-IPO peak back in April, and it is more than 10 percent of the float. At the current average daily volume, it would take a little more than a day to cover all short positions.

Analysts still expect Twitter to book more than $1 billion in revenue for 2014 but to be barely profitable. The San Francisco-based company has a market cap of more than $22 billion. Note that the return on equity and the operating margin are both in negative territory.

The consensus recommendation of the analysts surveyed is to hold Twitter shares, and it has been for at least three months. The analysts’ mean price target indicates about 13 percent potential upside, relative to the current share price. That consensus target is well below the post-IPO high, though.

Twitter’s share price popped about 11 percent during the two-week period, only to pull back more than six percent afterward. Over the past six months, the stock has underperformed Facebook, Google and LinkedIn. It also has underperformed the Nasdaq and the S&P 500 in that time.

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

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