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Monthly Pick—-AMZN (Short Sell candidate)

by Rick

Here’s my take on AMZN.
Stock is near its March 2000 glory and has almost doubled in recent months. Currently trading at 123 times earnings and 57 times foward earnings. This far exceeds EBAY (20 times earnings) and GOOG (27 times earnings).

The price now exceeds even the most optimistic analysts. The next earnings release must WOW to the upside or the stock will tank. Now is may be a good time to lock in some profits
It is obviously grossly overvalued, and over the long term will have to fall back down. The fundamentals always win long term but short term anything can happen. The problem is that it is also one of the most manipulated stocks that I have ever traded and is being pumped so much that calling a top can be extremely risky. If you have the ability to ride out the short term when it corrects I believe you will come out ahead but it can be a bumpy ride until it does. If you do want to build a short position I would highly suggest getting in small so you can not get squeezed out and add more as it moves up or down over time(again in small increments). Don’t get in highly leveraged where you will have to cover on short term rises. That can force you to loose it all, and will push up the price more for everyone else. I can afford to ride this baby up over 100, if I have to, averaging up the entire way. I really don’t think it will ever get there but I am prepared if it does. I am fairly confident that in a years time it will be in the 50s or lower, but I do not know where the top is or how long it will take to get there.

As far as options, I find them harder because not only do you have to be right, you have to be rigt within a time deadline. I don’t know when that deadline is. So in this case I’d rather be a long term short. Happy shorting :) amzn2.png


Posted in Monthly Pick on June 11th, 2007

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