S3 Analytics: July 24th – July 28th Best and Worst U.S./Canadian Short Performers

Every week, S3 tracks short sellers’ equity positions in the US, revealing the trades that delivered positive results or missed the mark.  After tracking $890 billion worth of short positions, the following is a list of this week’s top five best and worst performing shorts.

STX US Seagate Technology topped our list for this week’s best performing short as share prices plunged 17.6%, netting short investors nearly a quarter billion in profits. Shares fell 11% on Monday when the electronics storage maker reported adjusted 4Q earnings per share of $0.65 that missed the lowest analyst estimate of $0.89. Their 4Q revenue of $2.41 billion was also short of the lowest analyst estimate of $2.56 billion. Seagate shares are up 4% YTD while the S&P 500 has risen 10%.

WAB US Wabtec Corp shares tumbled 14.2% last week after it posted weak 2Q earnings that missed lowest analyst estimates. 2Q adjusted EPS was $0.80, missing the lowest analyst estimate of $0.90 while 2Q net sales of $932.3 million missed the lowest analyst estimate of $967 million. By Tuesday, the railroad supplier had fallen below its 50 day moving average and by Friday it fell below its 200 moving day average of $83.21. YTD profits for short investors were $45 million prior to their earnings release, but just topped $250 million after this price move.

TWTR US Twitter shares declined by 16.7% last week after posting a 2Q earnings report which beat on EPS and revenue growth but highlighted a subpar 5% year-on-year increase in monthly average users and a monthly decline in U.S. monthly average users. U.S. advertising revenues also declined from the prior quarter as most ad revenues still flow towards Google and Facebook.

MU US Shares of semiconductor and memory chip manufacturer Micron Technology slipped 8.53% last week after rallying 125% in the past year. After a sharp rise in June, shares have since cooled down, falling 5.6% on Tuesday to close below its 50 day average. Investors are now concerned whether this is a short term retracement or a reflection of a tight DRAM market, which is getting more capacity from competitors. MU short interest rose $245 million in the first half of July, to $1.86 billion, but has since fallen back down to $1.48 billion, slightly above MU’s 2017 average short interest of $1.34 billion.

NFLX After climbing to an all-time high of $189.08 on Wednesday, Neftlix shares dropped 2.7% to close at $184.04 Friday. Since its positive 2Q earnings report, which posted substantial subscriber growth in both the U.S. and internationally, short interest in Netflix has increased by $824 million. Even with a last week’s profits, Netflix shorts are still down $887 million in July. With Netflix stock up 49% in 2017, short sellers may be hoping for a slight pullback from July’s 21.6% stock price spike.

T US AT&T posted an impressive 2Q earnings report on Tuesday that sent prices soaring 7.7%. Areas of strength for the telecom giant included subscriber gains, business wireless, and strategic services. EPS was $0.79 compared to analyst estimates of $0.74. Moving forward, the company looks to grow through its $85 billion acquisition of content-saturated Time-Warner, which is expected to be completed later this year. To help finance the acquisition, AT&T held a $22.5 billion bond sale on Thursday, the third largest ever.

BA US Boeing, also posted strong 2Q results and its stock price rose 13.73% last week to make it the best performing stock in the DOW. Despite lower year-on-year revenues, Boeing still managed to reach margins above 10% through cost cutting strategies. The commercial jet airline manufacturer announced an optimistic full year outlook which led analysts from Goldman Sachs and Bank of America to upgrade the company from sell to neutral and from neutral to buy and their price targets from $130 to $205 and from $225 to $275, respectively.

TSLA US Tesla ended the week up 2% after a rollercoaster ride. Prices rose 4.3% on Monday before pulling back 2.2% to end the week, allowing short sellers to recoup some of their losses. Tesla finally delivered its first round of Model 3s on Friday night at a ceremony hosted by Elon Musk. The electric car company is now focusing on ramping up its production for the Model 3 to meet the 500,000 reservations they have received to date. Both long and short investors are eagerly awaiting Wednesday’s 2Q earnings report. Tesla short interest is down $376 million in July, to $9.5 billion as shorts are still holding onto their positions despite being down $2.2 billion year-to-date.

FB US Facebook was another major beneficiary of a strong 2Q earnings report and saw its stock price jump 4.9% last week before closing at an all-time high of $172.45. User subscription growth for its core site surpassed 2 billion while its subsidiary Instagram surpassed 700 million users. Facebook’s advertising revenues continue to improve, growing 47% year over year to $9.16 billion during the quarter. Profitability for the year is likely to outperform expectations as Facebook tightened the top end of its expense growth guidance from 50% to 45%. Even with Facebook up 47% on the year, short sellers are increasing their exposure to the stock, short interest has increased by $791 million, or 27.5% in July, to $3.7 billion. Shorts are down $727 million, or -25.4%, for the year.

CHTR US Charter Communications rose 5.8% last week despite 2Q earnings which missed analysts’ estimates. 2Q revenues were $10.36 billion compared to a $10.38 billion estimate while EPS was $0.52 compared to estimates of $0.81. Prices also jumped on news that Sprint had proposed a potential merger with Charter, which would result in a media and telecom giant controlled by Japanese telecommunications giant Softbank, which owns Sprint. Charter reportedly rejected the deal, but Softbank may still look to make a formal offer despite the initial rejection.

Want deeper insight into the above analysis?

Contact: Ihor.Dusaniwsky@S3Partners.net

Managing Director Predictive Analytics, S3 Partners, LLC

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decisions.