Pitney Bowes Inc. (NYSE:PBI)
Why are investors shorting Pitney Bowes Inc. (NYSE:PBI)?
- Short interest in mail hardware and software solutions provider Pitney Bowes Inc. (NYSE:PBI) has remained about the same, month over month, as investors continue to expect that digital forms of communications (i.e., email) will make standard mail obsolete. Given the visible signs of struggle at the U.S. Post Office, which is a big customer of Pitney Bowes Inc. (NYSE:PBI), investors have positioned themselves to expect ongoing revenue erosion from the company.
Is this short interest warranted?
- Based on the reaction in share prices shortly after Pitney Bowes Inc. (NYSE:PBI) released first-quarter results last week, I think a high level of short interest is justified. Pitney Bowes Inc. (NYSE:PBI) has zero revenue growth catalysts on the horizon, and it slashed its dividend by 50% to just $0.75 annually in order to reduce cash outflow. Although it still yields at an attractive level, I fail to see any reason why Pitney Bowes is an attractive buy.
J.C. Penney Company, Inc. (NYSE:JCP)
Why are investors shorting J.C. Penney Company, Inc. (NYSE:JCP)?
- Are there any reasons left not to bet against struggling department store J.C. Penney Company, Inc. (NYSE:JCP)? The company alienated many of its core customers by removing sales and introducing everyday pricing. In addition, its store-within-a-store concept has hit a roadblock with ongoing litigation between Penney and Macy’s, Inc. (NYSE:M) over the use of the Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) brand in its stores.
Is this short interest warranted?
- I should say so! J.C. Penney is working on its next series of ads, which is nothing more than a mea culpaafter it messed up. That worked for Domino’s Pizza, Inc. (NYSE:DPZ) in the past, but we’re talking about more than just a pizza here! Penney’s has taken the initial step of reintroducing its discount price strategy to drive business and hopefully regain lost customers, but the simple fact that it rehired Mike Ullman — the same CEO whom Ron Johnson replaced and who caused at least some of Penney’s current problems — doesn’t sit well with me.
Frontier Communications Corp (NYSE:FTR)
Why are investors shorting Frontier Communications Corp (NYSE:FTR)?
- Frontier makes its debut among the S&P 500’s most short-sold stocks on the thesis that its landline business (and thus the beefy margins that go with it) are slowly eroding. Frontier is doing what it can to following Comcast Corporation (NASDAQ:CMCSA)‘s lead by bundling services in order create more loyal customers, but as wireless coverage gets better and extends into more rural areas, Frontier could find itself even more exposed to landline attrition.
Is this short interest warranted?
- I’d certainly say some level of skepticism is warranted, given the slow but steady decline in landline customers. Frontier will have to present a clearly outlined growth strategy to Wall Street for investors to have any hope of seeing the share price take off. One bonus is that Frontier has kept its nearly 10% dividend yield intact — but as we saw with Pitney Bowes, that may prove meaningless if there’s no growth to back that cash flow up.
The article The S&P 500’s 5 Most Hated Stocks originally appeared on Fool.com.
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 owns shares of GameStop and Microsoft.
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