shorting AMZN, TSLA, and NFLX

ScroogeMcDuck

ScroogeMcDuck

A PE ratio over 500 on a company the size of AMZN is crazy. It's like the dotcom bubble all over again. They have to grow earnings by 30x to justify it. That would take at least a decade at realistic growth rates, so then you have to discount the value of the future earnings because they're so far in the future. $180 might be a plausible price for AMZN, but $530 is pure irrational exuberance so I'm gonna short it when the market opens.

TSLA and NFLX are similarly overpriced and I shorted them yesterday. Already made 5% on TSLA. Gonna long LNKD though, because it just had a huge correction and unlike the other three there's no reason they can't have huge profit margins in the long run. The network effect will give them monopoly profits just like FB.
 
Good luck.. Just make sure you use a protective stop! Trust me on that one. It's important to get out even if in the long run you are correct the market can always stay irrational longer than you, or anyone, can stay solvent.
 
yes stop is good, also its hard to predict when zon/tsla will drop, Ive seen drop usually happen due to bad Q earning, so around that time maybe is good time to entry.
 
The thing is that market does not care about PE ratio if a company has a stable growth of sales. I am also very bearish on the stocks you mentioned.
 
With shorts I use put options to limit risk. You may lose your entire premium but you can get the leverage of a much larger short position if it works out.

However, when I use options time is hurting you so I need to see a near-term possible catalyst. For example, I have SCTY puts because every earnings report is disappointing, so I want my position sometime before that, but expiring after that. With TSLA, I don't know the catalyst. It is a cult stock owned by greens and Tesla car owners, and earnings, cash flow, and failures to make their own predictions don't seem to matter. With AMZN, unless the revenue growth slows, the religion continues.
 
yeah, I've decided these are really shitty investments, and made a bit of free money shorting them, but they're not shitty enough to be worth the risk of shorting them. Can make more money per unit of risk in other things like ETF arbitrage.
 
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