Why Short Sellers Piled On eBay
eBay Inc (NASDAQ: EBAY) stood out among the leading social media companies based in the United States for its surge short interest between the January 30 and February 13 settlement dates.
Short sellers also were attracted to LinkedIn Corp (NYSE: LNKD) and Pandora Media Inc (NYSE: P) particularly during the period.
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 trends in other social media stocks.
eBay
After declining by 11 percent in the previous period, short interest in this San Jose, California-based online commerce company surged more than 71 percent to almost 25.65 million shares in early February. That was more than 2 percent of the float and the highest number of shares short in the past year.
In the period, eBay began layoffs ahead of its spin-off of PayPal, and it restated its financials. Its market capitalization now is near $70.5 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 41 analysts who follow the stock that were surveyed by Thomson/First Call, 19 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 only marginally higher than the current share price.
Short sellers watched the share price rise more than 6 percent during the two-week settlement period. The stock is up about 4 percent year to date, and it has underperformed competitors Amazon.com and Overstock.com, as well as the broader markets, over the past six months.
See also: Short Sellers Come Back To Biotech Stocks
Short interest in this online professional network operator jumped more than 15 percent to around 6.67 million shares in the first weeks of the month, taking back much of the 26 percent drop in the previous period. The mid-month figure represented more than 6 percent of the float. Days to cover was less than three.
A strong earnings report garnered LinkedIn raised price targets from Citigroup and others. The Mountain View, California-based company has a market cap of near $31.2 billion. The long-term EPS growth forecast is more than 40 percent, but the return on equity is in negative territory.
Of the 38 polled analysts, 28 recommend buying shares, while the rest recommend holding them. The mean price target is about 6 percent higher than current share price and would be a new 52-week high. At least one analyst sees LinkedIn reaching $331 a share, suggesting more than 17 percent upside.
Shares saw a gain of more than 19 percent during the short interest period. They have risen less than 2 percent since, but they also hit a new multiyear high this week. Over the past six months, the stock has outperformed the likes of Facebook and Google, as well as the broader markets.
Pandora
Short interest in this Oakland, California-based Internet radio provider increased about 8 percent during the period to around 29.07 million shares, largely reversing the decline in the previous period. Almost 15 percent of the total float was short on February 13. Days to cover dropped from more than four to less than three.
Pandora offered disappointing earnings and outlook early in February. The company now has a market cap of about $3.1 billion and a long-term EPS growth forecast of about 43 percent. Both the return on equity and the operating margin remain in negative territory.
Of the 30 polled analysts, 20 recommend buying shares, with seven of them rating the stock at Strong Buy. A move to the mean price target would be a gain of almost 30 percent for the shares. Note however that the consensus target is less than the 52-week high from almost a year ago.
The share price fell about 7 percent during the short interest period, compared to a gain of more than 5 percent for the Nasdaq. Shares are still down almost 15 percent year to date. The stock has not only underperformed the S&P 500 over the past six months, but competitor Sirius XM as well.
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And Others
Short interest increased more modestly in Google, Twitter and Yelp in early February. The number of Shutterfly shares short was about the same at the beginning and end of the period, and short sellers shied away from Angie's List, Facebook, Groupon, MeetMe, United Online and Zynga during the period.
In addition, note that the number of U.S.-listed shares (or ADSs) sold short of Chinese social media companies Baidu, Renren, Sina, Weibo and YouKu Todou grew in early February, while short interest in Sohu.com and YY shrank.
At the time of this writing, the author had no position in the mentioned equities.
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