Longs are nuts. Stock had already run up 20% in anticipation of the beat ... what a racket Wall Street is.
This is a huge fallacy that longs like to tout ... check AMZN depreciation (the cash flow add back of Capex) vs. Capex .. Over the past 3 Q's Capex has been $2.5B while Depreciation is $2.3B. So, FCF has only dropped $200M for the first 3 Q's of 2013. What is impacting FCF is the lack of earnings you idiots ....
Not bad to increment your forward P/S multiple a full digit in 1-day.
The only solice I have is that no one is a real investor or really beleives this is worth it. They are gambler junkies trying to score a quick hit.
Today looks like long buying, and not short covering.
What can your upside possibly be at $82??? The downside is $30-50 (to meet fair valuation), while upside is maybe $8 to $10 in another parabolic crazy lucky move????
The date was Sept 19, 2013 and the stock had just been on a 3-day run from $62 to $71 (+15%). We'll see if that happens on MOn & Tues.
Today's action confirmed what I have posted (momo has ended after the 4-5 day run) - the stock will turn tomorrow and head south as the support is long gone now. Best bet is that over the next 5 days or so, stock will retreat to $68 or so. Let's hope it is not shorts that do it, but rather more long exits. If it is shorts, the drop wil be much shorter lived and the stock could be victim to another squeeze over the next few weeks.
That is a big number .. shorts have been cleared out, and a big institution or 2 has unloaded on those 8.5M shorts with HUGE profit. The stock will now see weakness over the next 3-5 days as the task is done. and new weak longs will take a loss on the drop and wonder what happened.
When a company has no earnings, and won;t reach potential for quite some time, but is growing like crazy and had good long range potential, the correct way to value (price-Per-Share (PPS)) is to use a very simple formula based on Price to sales (P/S), Revenue growth (RG) and a comparison mature company Net margin (NM):
PPS = NM * RG * Revenue / Shares
If we assume FB kind of net margins of 25% (very, very good), and the 50% fwd analyst rev growth, that is a P/S of 12.5. Multiple that by TTM revs / shares, and you get a fair value target price of $39.60.
That is 50% downside today. If you look at the end of 2014 with revs at $347M, that is share price of $65.6 .. a downside of 20% even if they hit revs and somehow show they can get to 25% net margin.
Once the price crossed its all time high, there is no limit on the upside in the short-term. The stock is completely removed from all fundamentals (as bodgan states below). The only stock with a higher P/S is TWTR and that has been slammed over the past few days on valuation grounds .. so this could be next - but you just don;t know. As I said in my last post, the big boys clearly want to unload and that is why Dana, JPM and Cramer did what they did the last/this week. The question is how long they let it ride, but it won;t be too long with TWTR leading the way (YELP stands out now like a sore thumb).
If what happened to LNKD is any example, right after the pump (12/4/2013) the dump happened (12/10/2013). The analyst PUMP brought it up $23 in 5 trading days (forced short covering), and then over the next 6 trading days it gave it all back as the big boys unloaded - the volume on the downside was much higher than on the upside - which is typical of a pump & dump .. (net negative cash flow on the same price after the run up and down)
Another good example - NFLX move from $300 to $380 happened with negative cash flow, and the fall back to $340 now is on bigger volume. Characterisitc of squeeze pump and dump again.
wow - that is the definition of parabolic ... up $12 in 3 days (18%).
Right now at 8:10am - JPM MM's are trying to open the stock north of $74 so someone can unload there. They placed a 20k buy order on ARCA pre-market at $74 to make sure it opens above that point. Wheels are in motion .... after the open it should finally sag down after this run since 12/31 .. time for a breather as cover demand from shorts will largely be dried up with a tired retain long from 3 staight hard days of pushing by sales.
It is a simple game, particularly on low float stocks with high institution % and high retail short interest. It is done for one of two reasons: (1) the company has either a follow on offering or bond offering coming soon and they need the stock price up prior to that (and banks make money from fees so they are incentivized to help, or (2) a large institution wants to unload w/o dropping the stock, so demand needs to be artificially created.
Here is how it is done:
They start by having MM's buying up some shares to move the stock up to move out the weak shorts (see Dec 31). As the weak shorts cover, volume picks up and institutions don't sell, so supply is kept low while demand is high. Once weak shorts are killed, a collusive firm raises the price target on bogus conjecture bringing in new buyers as the firm's sales teams call everyone to push hard. This creates a second short squeeze of typically higher volume and price movement (see Jan 6). Once the second round of moderate shorts get shot and cover, they go back for one last push (if the institution still has more shares to unload via the upper deck) - and a second, typically more well known analyst, offers a PT increase to shoot the final shorts and create one last push to new highs (see today - 1/8/2014).
Has anyone looked at the fincials of this PIG? .. Analysts expect about 2x the rev growth of AMZN in 2014, yet it is valued at 10x (and Amazon is already at a bloated valuation).