Ancestry.com Takes a Tumble

NEW YORK ( TheStreet) -- Shares of Ancestry.com ( ACOM) fell sharply on heavy volume Tuesday, making a convincing break below key technical levels.

The move comes after the latest short interest data showed a spike in investors betting the stock is headed for a fall.

Bloomberg highlighted the increase in an article published late Monday, including the company on a list of stocks seeing the biggest percentage boosts in short interest vs. the public float as of Aug. 31. Ancestry.com saw the percentage of its public float held short swell by 3.9% to 25.54% from 21.67% as of Aug. 15.

According to data on Nasdaq.com, the number of Ancestry.com shares held short increased 17% to 6.03 million as of Aug. 31 from 5.1 million two weeks before. That rise follows a 33% jump over the previous two-week period spanning the start of August.



After spending most of the session down more than 10%, the stock was recently off 7% at $28.20 with 3.69 million shares changing hands, more than three times the issue's trailing three-month average daily volume of 1.07 million. The drop has the shares on track to close below $30 for the first time since Aug. 19, while a finish below $28 would be the stock's first since Dec. 29. At current levels, the shares have pulled back roughly 40% since hitting a 52-week high of $45.79 on April 29 and Tuesday's decline is building on a 5% drop in Monday's session.

The selloff also pushes the stock well below both its 50-day and 200-day moving averages of $33.10 and $36.16 respectively. At the session low of $26.91, the shares were 18.7% and 25.6% below those key technical levels, indicative of a dramatic breakdown in support.

The only news specific to the company Tuesday was its selection of Duncan/Channon to craft a new advertising campaign for the Provo, Utah-based online family history research company. The campaign is anticipated to launch in the fourth quarter, and will include "TV, digital and print, that will evolve the brand's image and expand its presence in the U.S.," the press release said.

Ancestry.com shares have been languishing since the company reported its fiscal second-quarter results on July 28. The stock closed the prior day at $40.18, but despite the company handily beating Wall Street's profit view, it tumbled 11% to $35.61 the next day. The quarterly report showed slowing sequential growth in subscribers with gross additions falling to 322,000 from 425,000 in the first quarter, and the monthly churn rate increasing to 4.6% from 3.7% in the first quarter.

A rise in the cost of netting customers also spooked investors as Ancestry.com said its subscriber acquisition cost increased 18% to $81.23 in the second quarter from $69.56 in the first quarter.

The company did lift its revenue outlook for the full year at that time but topline growth has become sluggish. For the third quarter ending later this month, Wall Street is looking for revenue of $103.7 million, which would be an increase of just 2.4% from the second-quarter total of $101.3 million.

As of Monday's close at $30.31, the shares were trading at a forward price-to-earnings multiple of 17.8X the consensus fiscal 2012 estimate for earnings of $1.21 a share, very reasonable for a growth stock but a bit pricey if the business is entering maturation mode, which is debatable. Tuesday's decline has of course brought the valuation in somewhat.

The heavy trading volume shows there's some conviction behind the move as Tuesday's session is the third busiest of 2011, trailing volumes of 4.1 million on July 29 after the second-quarter report and 10.4 million when the stock hit its 52-week high.

Wall Street is still extremely bullish on Ancestry.com though with all nine of the analysts covering the stock at either strong buy (6) or buy (3) and the 12-month median price target sitting at $46.

A company spokesperson wasn't immediately available for comment.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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