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Einhorn says this stock will drop 80%

Talking Numbers

Einhorn says this stock will drop 80%

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Einhorn says this stock will drop 80%

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The technicals are now saying buy this stock: Pro

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The technicals are now saying buy this stock: Pro

David Einhorn has put on some new shorts.

No, the hedge fund manager isn't getting ready for a Caribbean vacation. Rather, Einhorn of Greenlight Capital has announced he's now short shares of Athenahealth, an online medical billing and medical practice management company founded by Jonathan Bush.

At the Ira W. Sohn Investment Conference, Einhorn said that he was short Athenahealth because he thought it was overpriced and could "easily fall" 80 percent, if not more.  On Tuesday, Athenahealth was down 13 percent.

Why do the markets care about what Einhorn shorts?

Because he has called some pretty big ones in the past.  In 2008 – in fact, at a previous Sohn Conference – Einhorn announced his short position in Lehman Brothers and eviscerated the bank in his speech. Within a few months, Lehman Brothers was no more after filing the largest bankruptcy in U.S. history.

Einhorn has made a lot of money shorting companies though he's lost a few bucks doing so from time to time. Sure, he called the collapse of Allied Capital a few years before it happened. But, he also thought Chipotle was a good short and has gotten roasted betting against Keurig Green Mountain.

(Read: Athenahealth sinks after hedge fund boss critique)

However, Gina Sanchez, founder of Chantico Global, said Einhorn is right to call Athenahealth a "bubble stock".

"The interesting thing about a tech bubble is that people buy stocks because they're going up," said Sanchez, a CNBC contributor.  "If you look at Athenahealth… they've had robust revenue but it doesn't seem to trick through to the bottom line. They've actually had falling EPS [earnings per share]. Their net margins are down alsmot 5 percent. So, I do think that there is some real reason for some caution."

In 2011, Athenahealth had a net income of nearly $19 million on $324 million in revenues. In 2013, its net income was $2.6 million on $585 million in revenue.

"There are a lot of questions about whether or not they can continue this growth," Sanchez said. "I think David Einhorn is on to something here that this is one of the many stocks that has had extraordinary price performance that's gone well beyond what its growth can actually deliver."

Steven Pytlar, chief equity strategist at Prime Executions, said the technicals are showing Athenahealth can move lower.

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"When you see a stock move this sharply lower on such heavy selling, it's really indicative of a complete investor abandonment," Pytlar said. "Basically, the valuation thesis for the move higher – whether it was momentum or where people had expectations of higher earnings – has completely dissipated. You see everyone trying to get out. And, really, that tends to mean that longer term, the stock generally doesn't get back to those highs for a very, very long time."

The stock is nearly 47 percent lower than its all-time high of $206.70 per share set in March. However, Pytlar cautions investors about any bounce it may see.

(Read: Einhorn's Athenahealth short is nothing new)

"Even if it is very oversold technically and we get a bounce, you'll probably see more sellers come out on that bounce," Pytlar said. "So, we would not be positive on that stock."

To see the full discussion on Athenahealth, with Sanchez on the fundamentals and Pytlar on the technicals, watch the video above.

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