Market Overview

Facebook, Zynga See Sharp Drops In Short Interest

Facebook, Zynga See Sharp Drops In Short Interest

Between the April 30 and May 15 settlement dates, some of the largest swings in short interest among the leading social media companies based in the United States happed to Facebook Inc (NASDAQ: FB), Twitter Inc (NYSE: TWTR) and Zynga Inc (NASDAQ: ZNGA).

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.

Related Link: Hedge Funds' 10 Most Shorted Stocks


Shares sold short in this social networking giant fell more than 17 percent from the end of April to more than 26.11 million by mid-May. That was more than 1 percent of the float, and the lowest level of short interest in the past year.

At the average daily volume, it would take about a day to cover all short positions.

Earlier this month, Facebook launched its Instant Articles feature. The company has a market cap of about $225 billion. While its long-term EPS growth forecast is more than 27 percent and the return on equity is about 15 percent, the price-to-earnings (P/E) ratio remains very high.

Related Link: Top Takeaways From Facebook's Investor Meetings

Of 49 analysts surveyed, 17 of them rate the stock at Strong Buy, and 26 others also recommend buying shares. Their mean price target, or where analysts see the share price going, is about 16 percent higher than the current share price. That consensus target price would also be an all-time high for Facebook.

Facebook shares ended the two-week period marginally higher due to pop in the stock in mid-May. The stock is up less than 3 percent year-to-date, as well as below the 50-day moving average. Over the past six months, it has outperformed Google and Twitter, as well as the S&P 500.


Short interest in this micro-blogging service provider swelled nearly 23 percent during the period. The more than 28.11 million shares short in the middle of the month represent more than 5 percent of the total float. It would take only about a day to cover all short positions.

Shares tumbled after Twitter results were leaked and have yet to recover. The company currently has a market cap of around $24 billion, but like Facebook and Google, offers no dividend. Note that the return on equity and the operating margin both remain in negative territory.

Related Link: Why This Hedge Fund Won't Invest In Twitter

Of the 40 analysts surveyed, 16 recommend buying Twitter shares, while only one rates the stock at Underperform. A move to the analysts' mean price target would be a gain of more than 23 for the shares. Note though that shares traded higher than that target before the recent selloff.

Twitter's share price ended the two-week period about 4 percent lower, and it has retreated more than 2 percent more since. Over the past six months, the stock has underperformed Facebook, Google and the broader markets, though it outperformed LinkedIn Corp (NYSE: LNKD) in that time.


Short interest in the online social games operator slumped more than 14 percent to around 61.16 million shares during the period, or just shy of 8 percent of the float. That was the smallest number of shares short so far this year. Days to cover dropped from about seven to a less than three.

Zynga posted better-than-expected Q1 results, but announced job cuts. This San Francisco-based company has a market cap of less than $3 billion. Its long-term EPS growth forecast is about 30 percent, but here too the return on equity and operating margin are still in the red.

For at least three months, the analysts' consensus recommendation has been to hold shares of Zynga. Yet, they see some headroom for the stock as the mean price target is more than 9 percent higher than the current share price. Note though that the consensus target is less than the 52-week high.

Short sellers watched the shares surge almost 25 percent in the first weeks of May, though it retreated less than 6 percent afterward. Over the past six months, the stock has underperformed the likes of Electronic Arts and Activision Blizzard, but outperformed King Digital and the broader markets.

Related Link: Lessons In Short Selling From The Master Short Seller Jim Chanos Himself

And Others

Short interest also increased somewhat in Angie's List Inc (NASDAQ: ANGI), eBay Inc (NASDAQ: EBAY), Groupon Inc (NASDAQ: GRPN), Shutterfly, Inc. (NASDAQ: SFLY) and Yelp Inc (NYSE: YELP) in early May, while short sellers shied away from Google Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), LinkedIn, MeetMe Inc (NASDAQ: MEET), Pandora Media Inc (NYSE: P) and United Online, INc. (NASDAQ: UNTD) during the two weeks.

In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Renren Inc (NYSE: RENN), SINA Corp (NASDAQ: SINA), Inc (NASDAQ: SOHU) and YY Inc (ADR) (NASDAQ: YY) grew in the first weeks of May, while short interest in Baidu Inc (ADR) (NASDAQ: BIDU), YouKu Todou Inc (ADR) (NYSE: YOKU) and Weibo Corp (ADR) (NASDAQ: WB) shrank.

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

Image Credit: Public Domain

Posted-In: Activision Blizzard electronic arts Instant Articles King Digital S&P 500Short Sellers Short Ideas Trading Ideas Best of Benzinga


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