Every week, S3 tracks short sellers’ equity positions in the US, revealing the trades that delivered positive results or missed the mark. After tracking $873 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:
• RH: Restoration Hardware reported solid 1st quarter earnings, meeting EPS and topping revenue consensus estimates. However, management is guiding 2nd quarter earnings lower and full year earnings falling short of expectations. RH stock price plunged more than 20% after the cutting earnings forecast. RH short interest is up $187 million, or 44%, this year but shorts have been covering recently, with $228 million of buy to covers in the last month. After RH’s recent sharp decline short sellers may be looking to realize some of their recent profits and exit their short positions which are still down over 50% for the year.
• TGNA: Tegna dropped 4.3% last Friday following the completion of the previously announced spin-off of Cars.com (CAR US), creating two publicly traded companies. Upon completion, Gracia Martore, president and CEO of TEGNA, retired and stepped down from the Board. He was replaced by Dave Lougee, president of TEGNA Media.
• BAC: Bank of America fell 2.1% last Wednesday after CEO Brian Moynihan warned that 2nd quarter trading revenues are expected to decline while at Bernstein Conference last week. In addition to a declining revenue stream, BAC expects a $300 million hit to expenses to cover the cost of closing data centers.
• WLL: Whiting Petroleum fell 4% last Friday after analysts at Credit Suisse lowering WLL’s rating from “outperform” to “neutral,” and lowering its target price from $15 to $13.
• CF: Fertilizer manufacturer CF Industries Holdings fell 3.6% last Wednesday to $26.90 as bumper agricultural production has pushed fertilizer prices downward. Cleveland Research has lowered its CF price target from $25 to $23. CF is the largest short in the U.S. Fertilizer & Agricultural Sector and second most shorted worldwide behind K+S AG.
Bottom 5 Worst Performing Shorts:
• TSLA: Tesla, the largest equity short in the U.S. market at $10.4 billion, was up 4.5% last week and was the worst performing U.S. short for the second week in a row. Consumer Edge raised Tesla price target to street-high $385. Company is continuing to ramp up production of Model 3 car, expected to be released at the end of this year. News of the all-time high is all the more impressive considering that Toyota just recently announced that it would be selling its entire stake in the company.
• PANW: Palo Alto Networks rose nearly 15% on Thursday after announcing3rd quarter earnings, which beat EPS consensus estimates by $0.06 and topped revenue estimates by $19.88 million. Shares were up by 10% following the earnings release and the company also issued optimistic 4Q estimates with projected revenues at $481 million to $491 million and EPS at $0.78 - $0.80.
• EXAS: Exact Sciences Corp closed at an all-time high of $38.31 last Friday (6/2/17), with its biggest jump taking place last Wednesday when prices climbed 10.4% ($32.65 to $36.47) on news that is colon-cancer screening test, Cologuard, would be covered by United Health Group Inc. Cowen, Canaccord, Benchmark, and Roth Capital all adjusted their buy rating on EXAS with targets of $40 to $50.
• CHTR: Charter Communications, now the largest short in the cable and satellite sector closed at $2.8 billion, closed at an all-time high of $353.03 last Friday (6/2/17). This followed its recent rejection of a potential buy-out bid by Verizon for over $100 billion, which valued its shares between $350-$400. Charter rejected the buy-out because the offer was too low and its largest shareholder, Liberty Media, wasn’t ready to sell. CHTR’s consensus target price is now $356.92, after analysts raised their one year targets for the stock by over 2.0% in the past three months.
• CTL: Cenutrylink Inc. rose 3.5% last Thursday (6/1/17) to $25.87 following an update on the acquisition of Level 3 Communications for $34 billion. The deal is not expected to be completed until September, but on Thursday Centurylink announced that Level 3’s current CEO Jeff Storey would stay with the merged company as COO and eventually replace Centurylink’s current CEO Glen Post at the start of 2019. Investors are optimistic about the replacement, as Storey is responsible for 175% gain in Level 3 stock price in the past 4 years compared to a 13% gain for CTL’s stock price in the same period.
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.