• Research

Jul 17, 2017

S3 Analytics: July 10th – July 14th 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 $831 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:
• SNAP: While much of the market was hitting record highs, Snap hit an all-time low last Wednesday of $15.24 per share, finishing the week down $1.91, or 11.1%. The stock is down nearly 50% since its IPO, leading analysts at Morgan Stanley (one of Snap’s underwriters) to lower their price target to $16. Investors seem worried with Snap’s ability to create an effective advertising platform that can generate enough revenue to compete with more established social media companies like Facebook, Instagram, and Twitter. Share price has seen consistent decline in the last two months. This is all the more ironic considering Facebook CEO Mark Zuckerberg had tried to buy Snapchat in 2013, was unable to, and now is one of the biggest contributor to their downfall. 
• T: AT&T fell $0.68 last week, a 1.8% dip that was still able to net short investors $103.7 million in profits. BAML analyst David Barden downgraded AT&T’s price target to $39 from $46, citing a possible technical headwind that may arise from the coming issuance of $40 billion in stock to fund the Time Warner deal, which could close by the end of the year. He also noted that the market has generally toned down expectations of positive catalysts such as a corporate tax reform.
• BBY: Best Buy dropped $2.61 (4.5%) last week following news that Amazon would start developing its own Geek Squad to help customers install certain products in their homes. Amazon’s announcement was yet another shot off Best Buy’s bow. Relative to other retailers, however, Best Buy has generally performed well and withstood the ever-looming Amazon threat, and is up 30% YTD.
• TSRO: Tesaro, a biotech company that specializes in commercializing cancer therapeutics, slid $8.62 (6.4%) last week on the heels of a report that sale of the company is unlikely to happen since there were no  bids that met the company’s expectations. This was despite the recent FDA approval of its much anticipated PARP inhibitor drug Zejula. 
• BAC: Bank of America dropped 1.7% on Friday, down $0.41.  The banking sector has, in general, released 1st quarter earnings reports that beat analyst expectations, but the decline in the banking sector shows that investors are more skeptical concerning the Trump Administration’s ability to pass financial regulatory reform in the near future, a promise he made that caused a major hike in the banking sector after he won the presidency.

Bottom 5 Worst Performing Shorts:
• TSLA: Tesla, who topped our list for best performing short in our last top 5, is back at the top of the worst performing shorts list after rising $14.56 (4.6%) last week, costing short investors $393.6 million in losses. CEO Elon Musk revealed a $50 million plan to build the world’s biggest lithium ion-battery system in South Australia, providing massive battery storage for a country desperately seeking new forms of energy storage after a severe thunderstorm caused a state-wide blackout. Additionally, anticipation for Tesla’s $35,000 Model 3 continues to grow as Musk rolled out one of the first production models recently.
• NVDA: Nvidia closed at an all-time high of $164.95 on Friday, costing short investors a total of $297.5 million. Analysts and investors continue to ride on this wave of optimism as Nvidia has solid prospects in the GPU market (graphics processing unit), AI projects, and semiconductors. The last of which has generated a lot of revenue for the company over the last few months as crypto miners have kept them in high demand.
• NFLX: Netflix enjoyed a $10.94 (7.3%) price increase last week. Morgan Stanley hiked its price target on Netflix shares to $185 from $175 citing a positive correlation between the amount of content offered and the amount of subscriber penetration in a given region. Furthermore, Netflix shows “The Crown,” “House of Cards,” and “Stranger Things” all received nominations at the Emmy Awards on Thursday for the best drama category. This was a best-ever total for streaming company, confirming that Netflix is a major threat to traditional broadcast and cable companies.
• AAPL: Apple rose $4.86 (3.4%) last week, a move that cost short investors $75.7 million. Apple’s gains were part of an industry-wide jump in the tech industry. Apple recently bought tens of millions of dollars of production equipment that it is planning to lease to South Korean suppliers in hopes that it can help create a steady flow of parts for the highly anticipated iPhone 8 that is expected to be released this fall.
• AAOI: Applied Optoelectronics Inc., a semiconductor manufacturer, was this week’s biggest loser for short investors in terms of loss margin, with a loss of 23.94%. AAOI’s share price jumped 25.1%, closing at an all-time high of $84.20 on Friday following impressive preliminary Q2 results that were much higher than analyst expectations. Reported revenue was $117 million, which outperformed guidance ranging from $106-112 million. Earnings per share were between $1.31 and $1.36, well above (17%) the midpoint of guidance range $1.09 and $1.19.

Want deeper insight into the above analysis? Contact:
Ihor.Dusaniwsky@S3Partners.net
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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