Is this short interest deserved?
Would a “Heck, no!” about cover it? For a while I, too, was one of those valuation mongers who couldn’t get past Sodastream International Ltd (NASDAQ:SODA)’s (at the time) P/E around 50. But times change. SodaStream is now seriously giving Coca-Cola and PepsiCo. a run for their money and its competitors are beginning to take notice. In SodaStream’s second quarter, the company delivered 29% sales growth as adjusted EPS rose by 42%. Instead of slowing down, rumor on the Street is that Sodastream International Ltd (NASDAQ:SODA) remains an attractive buyout candidate. This isn’t the first time we’ve heard this rumor and it’s unlikely to be the last. With solid growth prospects, a forward P/E of just 18, and a revolutionary product, I’d say it’s the short sellers who have everything to worry about.
NII Holdings
Why are investors shorting NII Holdings, Inc. (NASDAQ:NIHD)?
Of the five most hated Nasdaq stocks, the pessimism against NII Holdings, Inc. (NASDAQ:NIHD) is by far the easiest to understand. NII Holdings, a wireless communications service provider in Central and South America, has struggled over the past couple of quarters with ballooning losses, higher debt levels, and weaker revenue from existing users. With subscriber rates and competition already high in many of the regions that it operates, short sellers see very little margin for improvement in NII Holdings, Inc. (NASDAQ:NIHD)’s bottom-line results.
Is this short interest deserved?
If you took the time to dig into NII Holdings, Inc. (NASDAQ:NIHD)’ second-quarter report last month, you’d be wondering why this isn’t the most short-sold stock of the bunch. Despite adding 100,000 net new subscribers, consolidated average revenue per user (i.e., the holy grail metric of margins for wireless service providers) fell about $5 to $36 from the year-ago period and the company had brought $1.6 billion in new bonds to market this year. Perhaps even more terrifying, its quarterly loss of $2.30 per share was more than double what Wall Street expected . This is the epitome of a perfect stock for short sellers.
Ebix
Why are investors shorting Ebix Inc (NASDAQ:EBIX)?
Like the previous two companies, there’s no riddle to be found as to why short sellers have piled into Ebix Inc (NASDAQ:EBIX), a software and e-commerce solutions provider to the insurance industry. As Fool Brian Shaw notes, after repeated attacks by short sellers, an investigation into allegations of intentional misconduct within the company was opened by the U.S. Attorney for the Northern District of Georgia. This investigation served as the perfect escape clause for a Goldman Sachs affiliate to back out of its proposed $20/share buyout of Ebix in June. With the investigation still ongoing, short sellers are betting on further downside.
Is this short interest deserved?
While you may be innocent until proven guilty in court, on Wall Street investors often take the exact opposite approach. With Ebix under investigation for intentional misconduct, any hope of a merger or buyout has been effectively wiped from the table. Worse yet, the longer this probe drags out, the worse it could hurt Ebix’s business from a PR perspective. On one hand, Ebix could come out clean as a whistle and investors can once again focus on its ridiculously inexpensive P/E of 7. Then again, if this investigation does turn up some level of intention wrongdoing, let’s just say I wouldn’t want to be an Ebix shareholder. Far too many questions make Ebix a stock to avoid.
