Pitney Bowes
Why are investors shorting Pitney Bowes Inc. (NYSE:PBI)?
- The bet against Pitney Bowes remains the same practically every month: As a provider of mail logistics hardware and software, short sellers suspect that the proliferation of email and smartphones will continue to erode the need for Pitney Bowes’ products. Pitney Bowes has been doing its best to move its products into the cloud and sold its management service division last month for $400 million, but it also hasn’t delivered an annual revenue increase since 2008.
Is this short interest warranted?
- On the bright side — and the one reason short sellers should be skeptical of Pitney Bowes Inc. (NYSE:PBI) — the company is paying out a forward yield of 4.6% and it now has an additional $400 million in cash to buoy the payment of that dividend. Beyond this payout, though, it offers little safety to its shareholders. Nothing has changed within its product line that would dictate a turnaround is in the cards or that the U.S. Postal Service is in any better shape than it was last year. With negative revenue growth still in the forecast, I see no reason to believe why Pitney Bowes’ rebound is sustainable.
Frontier Communications
Why are investors shorting Frontier Communications?
- Short sellers remain steadfast in their pessimism of Frontier Communications because of its steady landline subscriber losses. Frontier purchased landline assets in 14 states from Verizon three years ago for $8.5 billion in the hope that it would supply the company with steady cash flow from rural customers. The problem has been that the reach of wireless technology is improving and customer attrition from its landline business is threatening to reduce its cash flow.
Is this short interest warranted?
- I’d certainly say that short sellers have every reason to be skeptical of Frontier’s ability to generate strong growth going forward. But if I were short, I’d also be concerned that the rate of customer attrition is way down and broadband customer additions are still strong. Frontier has stuck by its cash flow and dividend in recent months, which places a lot of pressure on short sellers since Frontier is currently paying out a 9.2% yield. Remember, short sellers are responsible for paying that dividend out of their pocket, and 9.2% is a fairly steep price to pay to bet against Frontier. I still believe Frontier has a slow-but-steady rebound written in its cards.
The article The S&P 500’s 5 Most Hated Stocks originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned, either.
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