Snap Inc. (SNAP) is the largest short in the Application Software Sector but short sellers have been trimming their exposure to the stock ahead of today’s third quarter earnings release. SNAP short interest is $1.7 billion, an increase of $445 million, or 35%, since mid-year, but short sellers have covered $115 million of their positions in the last week and $278 million from its year-to-date high of $2.0 billion in mid-October.
| Application Software Sector
(in $ millions) |
Ticker | Short
Interest |
1 Month
Change in Short Int. |
1 Week
Change in Short Int. |
11-6-17
YTD MTM P/L |
| Snap Inc. | SNAP | $1,721 | -$22 | -$115 | +$239.8 |
| Salesforce.com Inc. | CRM | $1,718 | +$32 | -$16 | -$531.1 |
| Workday Inc. | WDAY | $1,629 | +$46 | -$22 | -$541.0 |
| Adobe Systems Inc. | ADBE | $959 | +$208 | +$63 | -$389.8 |
| Splunk Inc. | SPLK | $757 | -$105 | +$13 | -$213.5 |
| Paycom Software Inc. | PAYC | $655 | +$39 | +$11 | -$389.2 |
| Ultimate Software Group | ULTI | $606 | -$24 | +$14 | -$45.0 |
| Autodesk Inc. | ADSK | $604 | +$107 | +$6 | -$323.2 |
| Factset Research Systems | FDS | $538 | +$34 | +$13 | -$95.4 |
| Blackbaud Inc. | BLKB | $536 | +$21 | -$15 | -$210.3 |
| U.S. Application Software Sector | $16,724 | +$624.0 | +$186.8 |
SNAP’s second quarter earnings release was on August 10th, in the week prior to its last earnings release SNAP’s short interest increased by $62 million, or 7%. After reporting disappointing results, SNAP’s stock price fell 14% in the next trading day due to misses in EPS, quarterly revenues, daily active users and average revenue per user. Short sellers made $135 million in mark-to-market profits on that day’s stock price decline.
Short sellers have not fared well in the Application Software Sector with the overall sector (S&P 500 Application Software Index) up 54% in 2017. Short sellers in the top ten most shorted names in the sector are down $2.5 billion in year-to-date mark-to-market losses. But, not every name in the top ten was a loser, SNAP shorts were the only winners in the group, making $240 million in year-to-date mark-to-market profits.
While SNAP shorts increased their exposure prior to disappointing 2nd quarter earnings results, they are covering ahead of 3rd quarter results. Since most traders know to cut their losses and let their winners run, this may be a signal that some shorts are expecting positive results and are cutting their exposure and realizing some of their year-to-date profits.
Want deeper insight into the above analysis?
Contact: Ihor.Dusaniwsky@S3Partners.net
Managing Director Predictive Analytics, S3 Partners, LLC
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