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May 16, 2017

S3 Research: May 8th – 12th Best and Worst 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 $832 billion worth of short positions, the following is a list of this week’s top five best and worst performing shorts.

Top 5 Best Performing Shorts:
• JWN: Nordstrom’s share price declined by 17.6% on the day of and after its earnings release. JWN beat analyst’s expectations on EPS by 59% but saw same store sales drop by 0.8% in the quarter. JWN is the most shorted company in the worldwide Department Store sector, ahead of Kohl’s, Marks & Spencer and JC Penny, and is third most profitable short in the sector, with this week’s P/L pulling the stock into the black, with a year–to-date mark to market profit of $179 million.
• SNAP: Snap Inc. reported first quarter results, which showed user growth slowing to 5%, with 166 million active daily users, and misses on revenues and earnings, while its cash burn rate doubled from the previous quarter. SNAP’s stock price dropped 21% on the bad news, but has subsequently recovered some of its losses. SNAP is the third largest short in the Applications Software sector, behind Salesforce.com and Workday, and short interest is just over $900 million, up 16% in May.
• PCLN: Priceline short sellers made back $154 million of their $655 million in year-to-date losses as its stock price declined 4.5% off its yesterday’s year-to-date high of $1911.13 on mixed 1st quarter earnings results. PCLN’s beat on EPS but missed on revenues, but most importantly, management gave weaker than expected guidance for 2nd quarter EPS, which caused the third largest short in the Internet Retail sector’s stock price to drop $86.36/share.
• INTC: Intel Corp’s stock price has been coming off its year-to-date high of $37.43/share for the past two weeks and Alliance Bernstein’s addition to its “Conviction Short” list pushed the stock’s price below $36/share. Intel is the second largest short in the Semiconductor sector behind high flyer Nvidia and with this week’s price drop, shorts are now up $70 million and profitable for the year.
• CAR: Avis Budget Group’s 1st quarter results came in below expectations with revenues and EPS affected by lower pricing and higher fleet costs, which squeezed margins. An additional drag on revenues is a weak used car market, which is decreasing the residual value of the car rental company’s fleet. Avis is the most shorted stock in the Trucking sector, with almost three times the short interest of rival Hertz Global Holdings ($639 million vs. $226 million). Short sellers have fared well in both car rental companies, earning a 42% in Avis ($261 million year-to-date profit) and 73% return in Hertz ($172 million year-to-date profit).

Bottom 5 Worst Performing Shorts:
• NVDA: NVIDIA Corp continues to be the largest short in the Semiconductor sector, with $3.8 billion in short interest, and least the profitable short in the Semiconductor sector, with a year-to-date mark to market loss of $659 million. NVIDIA reported 1st quarter results, which crushed expectations in both revenues and EPS. NVDIA’s stock price hit year-to-date highs on Wednesday, Thursday and Friday.
• TSLA: Tesla’s solar roof product pre-sales began on 5/10 and with taxpayer subsidies, are more affordable than initially expected. Tesla’s short interest continued to climb, up $1 billion this month to hit a new historical high of $10.6 billion by the end of the week. Short sellers continue to build their short positions as their losses mount, down $3.7 billion for the year.
• AAPL: Apple’s stock price hit its year-to-date-high of $156.10 on Friday as Goldman Sachs raised revenue estimates on expectations of greater sales of the iPhone 8, even at the higher expected price of $1,000 per phone.
• W: Wayfair Inc. hit a year-to-date high of $64.54 on Thursday after the household goods online retailer reported 1st quarter results, which beat on EPS by $0.10 and sales by $25 million. Short sellers are down $354 million year-to-date, a loss of 67% on their short positions.  Shorts are still strong in their conviction with short interest is now nearing the $900 million level as Wayfair continues to burn through cash at a high rate, pay very high customer acquisition costs, and faces stiff competition as Amazon enters the online furniture retail space.
• AMD: Advanced Micro Devices had positive 1st quarter results with revenues growing 18% year over year and gross margins on their existing product lines expanding. Their new Ryzen 5 processors have had positive reviews and that is being reflected in their mini-rally with their stock price breaking through and holding the $11 price level. AMD is the fourth largest short in the Semiconductor sector and shorts have bought back $70 million of their shorts over the last month. Short sellers are still profitable year-to-date, up $36 million, but may be looking to exit their short stock positions and lock in whatever profits are left.  

Want deeper insight into the above analysis? Contact: 
Head of Research, S3 Partners
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 decision.

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