Why Short Sellers Should Drool All Over Facebook

When Twitter (TWTR) was selling at $48, I wrote this….Why Twitter (TWTR) Should Go On Your “Stocks To Short” List Less than 6 months later it is trading 35% lower. With that in mind, I continue to maintain that the worst is yet to come for the company. By the time upcoming bear market ends, Twitter should be below $10.

Now, here is why short sellers should drool all over Facebook.

And while I might eat crow for dinner tonight, this view is a longer-term one. Even if Facebook (FB) reports great earnings and jumps higher later on today, I continue to believe that Facebook is one of the best shorts out there. That is to say, if a jump does occur, use it as an opportunity to load up on the short side. That is, after upward pressure, if any, dissipates and the stock reverses.

While most investors today will laugh at me when I suggest that Facebook (FB) will see $20 a share over the next 3 years, I will laugh back when it does. I promise. Here is why……

As discussed over the last few days, Facebook is massively overpriced. At its $275 Billion market cap, the company is now worth more than GE. At 10th the revenue base and a P/E of 95. I guarantee you, investors in Facebook today will look back in 2-3 years and wonder “What the hell were we thinking”.
I am beginning to notice quite a bit of fraudulent activity on Facebook when it comes to likes, promotions, paid advertising, etc… That is firsthand knowledge, but you can Google the same and do your own research. That suggests the Facebook is running out of growth and its multiple is not justified. By a long shot.
See those massive gaps all the way down to $20 a share? Yep, they will have to be closed at some point.
We are on a verge of a multi-year substantial bear market. Click Here. When such bear markets develop, if past is any history, such overvalued and over hyped stocks tend to lose 80-90% of their value. Just as the gaps above suggest. I don’t know why this time would be any different.
Short interest is low.

Finally, even at $20 a share, Facebook will be extremely overpriced. In other words, I just gave you a 80% gainer, but its up to you what you do with it. As always, TIMING is the key here.