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May 18, 2017

S3 Research: Priceline Group Short Interest Tops $3 Billion

Short sellers are betting $3.36 billion that the stock price of Priceline Group (PCLN US), the online travel company, is due for a crash landing.  S3 Partners calculates as many as 1.87 million shares are now out on loan to bearish speculators after the company reported 1Q earnings last week that beat analysts’ forecasts, but more importantly, offered weaker earnings guidance for 2Q.

Since reaching an all-time high of $1,911 per share on 5/9 prior to the earnings announcement, shares have dipped over 6%.  Instead of seeing short sellers trim positions and take profits over the past week of trading, we have witnessed quite the opposite.  Bearish bets measured on a notional basis are up by another $194 million, with shares borrowed up another 214k, meaning investment managers are keeping their percentage of short exposure in their portfolios up as the price declines.

To put things in perspective by analyzing short selling activity over the past year, short exposure in May of 2016 was at $1.79 billion, when PCLN stock was trading at $1,278 per share with 1.4 million shares on loan.  With the stock price up 40% over this same time frame, bearish bets are now up 87% on a notional basis, to the aforementioned $3.36 billion we measure today.  

Turning our attention to Expedia (EXPE US), the main competitor in the online travel booking space, S3 Partners measures real-time short interest exposure to be $1.55 billion currently.   This figure tells us that more than double the amount of real money is being bet against PCLN in anticipation of a price decline, when compared to EXPE at the moment.  With ample borrow liquidity available to continue to build short positions further, bearish bets against Priceline have plenty of room to ascend higher.     

Want deeper insight into the above analysis? Contact:
Director, 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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