Google, eBay See Sharp Swings In Short Interest
Among the leading social media companies based in the United States, eBay Inc (NASDAQ: EBAY), Google Inc‘s (NASDAQ: GOOGL) A shares and Groupon Inc (NASDAQ: GRPN) saw some of the wildest swings in short interest between the March 13 and March 30 settlement date
Below we take a quick look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at the short interest moves in other social media stocks.
After three periods in a row above 20 million, short interest in this San Jose, California-based online commerce company drooped more than 27 percent to almost 17.80 million shares in late March. That was less than 2 percent of the float and the days to cover slipped to less than two.
In March, eBay was downgraded due to increasing competition. Its market capitalization is more than $70 billion, and the long-term earnings per share (EPS) growth forecast is about 11 percent. The operating margin is better than the industry average, but the return on equity is near zero.
Of the 42 analysts who follow the stock and were surveyed by Thomson/First Call, 20 recommend buying shares, with 10 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is less than 4 percent higher than the current share price.
Short sellers watched the share price retreat less than 3 percent during the two-week settlement period. Like the S&P 500, it is up about 2 percent year to date. eBay has underperformed competitors Amazon.com and Overstock.com, as well as the Nasdaq, over the past six months.
Short interest in A shares of this Mountain View, California-based operator of Google+ and YouTube surged almost 25 percent in the period to more than 3.85 million shares. That was a more than 1 percent of the total float, as well as the greatest number of shares short since last May.
The consensus revenue forecast for Google calls for annual growth of more than 14 percent both this year and next. Its market cap is more than $373 billion. The long-term EPS growth forecast is almost 16 percent. Its P/E ratio is less than the industry average, and the return on equity is almost 15 percent.
Of the 48 analysts polled, 17 rate the stock at Strong Buy, and 22 others also recommend buying A shares. A move to the analysts’ mean price target would be a gain of more than 12 percent from the most recent close. That consensus price target would be a new multiyear high as well.
Like the Nasdaq, the A shares ended the two-week short interest period marginally higher. While the Nasdaq has continued to climb since, the share price slipped a bit. The stock has underperformed not only Facebook and Yahoo over the past six months, but the broader markets as well.
This online local commerce marketplace saw short interest retreat about 14 percent during the period to more than 59.26 million shares. That was the smallest number so far this year and less than 13 percent of the float. At the daily average volume, it would take about nine days to cover all short positions.
An analyst’s upgrade during the period failed to move the needle much. The Chicago-based company now has a market cap of nearly $5 billion. While Groupon has a long-term EPS growth forecast of more than 27 percent, its return on equity and operating margin are 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.
Short sellers watched the shares pull back more than 7 percent during the short interest period, although it has recovered more than 2 percent since. The stock has not only outperformed the likes of eBay and Facebook over the past six months, but the broader markets as well.
Short interest increased more modestly in Angie’s List, Facebook, MeetMe, Twitter and Zynga in late March. However, short sellers shied away from Google C shares, LinkedIn, Pandora, Shutterfly, United Online and Yelp during the period.
In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Baidu, Sohu.com and YouKu Todou grew in the final weeks of March, while short interest in Renren, Sina, Weibo, and YY shrank.
At the time of this writing, the author had no position in the mentioned equities.
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