SalesForce looks like an ideal short right now because of the ridiculous rally it made at the end of August. The stock rallied $80/share, which translates to a market cap increase larger than the entire NFL. Crazy, right? When you read the reason for the earning surprise below, it's even crazier.
As Reported By Salesforce:
"Second quarter GAAP diluted earnings per share was $2.85...Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.55 based on a U.S. tax rate of 25% and non-GAAP diluted earnings per share by $0.58 based on a non-GAAP tax rate of 22%. GAAP diluted earnings per share was also benefited by $2.17 as the company changed its international corporate structure, which included the consolidation of intangible property, resulting in a $2 billion net tax benefit related to foreign deferred tax assets."
I'm all for bullish optimism by default, however this stock rallied dangerously with no clear support level below the run-up. Its kinda hanging in no-man's land right now with no fundamental reason to support that level (P/E ratio is currently 95, astronomical). I expect a retest of the lows, followed by once of the shown scenarios. If the stock does break through the lows, then I expect the stock to range downwards to $200 hitting various fibonacci levels as resistance/support on the way down.
Welcome to Tech Bubble 2.0!
As Reported By Salesforce:
"Second quarter GAAP diluted earnings per share was $2.85...Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.55 based on a U.S. tax rate of 25% and non-GAAP diluted earnings per share by $0.58 based on a non-GAAP tax rate of 22%. GAAP diluted earnings per share was also benefited by $2.17 as the company changed its international corporate structure, which included the consolidation of intangible property, resulting in a $2 billion net tax benefit related to foreign deferred tax assets."
I'm all for bullish optimism by default, however this stock rallied dangerously with no clear support level below the run-up. Its kinda hanging in no-man's land right now with no fundamental reason to support that level (P/E ratio is currently 95, astronomical). I expect a retest of the lows, followed by once of the shown scenarios. If the stock does break through the lows, then I expect the stock to range downwards to $200 hitting various fibonacci levels as resistance/support on the way down.
Welcome to Tech Bubble 2.0!
Comment:
Trump's tweet on the stimulus has enormously manipulated market structure across the board. What should have been a natural retest cycle to the downside after testing the high 6 times and failing, now SalesForce has risen into no-man's land with increasing volatility. A fall is imminent. Please be careful if you're on the other side of this idea. Something as trivial as a tweet is now controlling the entire market.
Comment:
Amazon Price/Earnings: 122
Adobe Price/Earnings 62
Tesla Price/Earnings: 1093
NFLX Price/Earnings: 94
Zoom Price/Earnings: 613
Historical for the entire S&P 500: 15.83
We are in the largest market bubble in history right now.
Furthermore, of the top 20 top gainers today with a market cap of $1 billion or more, five of those companies have any earnings whatsoever. (See for yourself: ibb.co/TMrqCnH)
The rest have no profit and are losing money hand over fist. Negative earnings.
I read a comment today that a trader said "valuations do not matter any more". Then what does? Clearly profits do not either. This is the definition of a bubble right now. Never before in history have we seen prices/earnings ratios this large.
The market is no longer a market right now, it's a voting machine. Stocks are going up because they're going up, not because they're increasing enterprise value. The trader's comment clearly shows the market psychology right now, economics and prices have been decoupled completely.
Adobe Price/Earnings 62
Tesla Price/Earnings: 1093
NFLX Price/Earnings: 94
Zoom Price/Earnings: 613
Historical for the entire S&P 500: 15.83
We are in the largest market bubble in history right now.
Furthermore, of the top 20 top gainers today with a market cap of $1 billion or more, five of those companies have any earnings whatsoever. (See for yourself: ibb.co/TMrqCnH)
The rest have no profit and are losing money hand over fist. Negative earnings.
I read a comment today that a trader said "valuations do not matter any more". Then what does? Clearly profits do not either. This is the definition of a bubble right now. Never before in history have we seen prices/earnings ratios this large.
The market is no longer a market right now, it's a voting machine. Stocks are going up because they're going up, not because they're increasing enterprise value. The trader's comment clearly shows the market psychology right now, economics and prices have been decoupled completely.