• Research

Feb 12, 2018

S3 Analytics: Pandora A/S Short Interest Declining as Stock Rallies

With Valentine’s Day just around the corner, Pandora A/S (PNDORA DC) stock price has rallied +9.5% in just over a week. The Danish jewelry maker reported that although it expects its 2018 margins to be lower than 2017’s the company expects increases due to new product and store growth. Pandora expects revenues to increase 7%-10% in 2018. The firm will increase its yearly dividend to 2 billion DKK and stock buybacks to 4 billion DKK, an increase of 5.6% year over year.

Pandora A/S is the 17th largest European short and the largest short in the worldwide Apparel, Accessories and Luxury Goods Sector. With the stock down 52.1% in local currency (DKK) and down 30.75% in U.S. dollars over the last two years, shorts were up $184.4 million in mark-to-market profits over the last two years prior to today’s 10.8 DKK spike in price which reduced their profits by $32.6 million in just one day. With today’s run-up, shorts are up $120 million, or 7.9%, in 2018.

Pandora A/S short interest has been steadily increasing over the last three years, with short interest averaging $96 million in 2016, $953 million in 2017 and $1.5 billion in 2018. Short interest is now $1.4 billion. Shorts had been reducing their short exposure ahead of the recent rise in its stock price, with short interest down $273 million over the last month and down from a historical high of $1.77 billion in late October 2017.

With Pandora A/S up almost 2% today and 9.5% since February 2nd, we might see some shorts getting back into the name searching for a short term reversal to the recent quick run-up. We’ve seen some shorting today and if the stock’s price begins to decline there might be a temporary acceleration of short selling in the stock. But if Pandora’s stock price remains strong, shorts will probably continue to reduce their exposure and lock in their profits before they disappear. If Pandora increases its E-commerce presence and gets a foothold in China, the largest jewelry market in the world, we should see short sellers reducing their positions dramatically and the resulting buy-to-covers pushing up its stock price even higher.

Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
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