After Netflix, What Other High Flier is About to Fall?
Peer into the corner of the trading floor and you'll likely spy market pros tossing around a sensitive but potentially lucrative trading idea – who will be the next Netflix?
In other words what other high flier is destined to come back to earth?
We couldn't think of anyone better to ask than famed short seller Whitney Tilson. (As you may remember Tilson shorted housing stocks ahead of the subprime crisis.)
”We’ve actually looked out there,” Tilson tells us. “We asked ourselves what’s the next stock that’s going to decline 75%.”
And after crunching the numbers Tilson tells us that he thinks the answer is Salesforce.com.
”It’s a good company but it trades at a very unrealistic valuation. We’ve made a fairly sizable bet on the short side that Salesforce is the next to blow,” he says.
Tilson's thesis is simple – he thinks the stock price has been driven by irrational exuberance about the pipeline. “(Although) the company has a nice app to help mid-size companies manage their sales forces," Tilson thinks something much bigger is priced into the stock.
“The CEO has generated a lot of enthusiasm about the company’s potential in large enterprise space. We’re very skeptical of that. Yet it’s already priced into the stock.”
And he points to another – almost eerie coincidence. The market cap for Salesfore is a little above $16 billion – the same amount as Netflix before it’s decline.
”We think at the end of the day fair value is down 75%,” he says.
* Want more ideas from Tilson? Check out what he has to say about SanDisk and Nokia. Watch the video now!
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Trader disclosure: On October 26, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; J. Najarian owns MF; J. Najarian is long CIGX; J. Najarian is long CME; J. Najarian is long CBOE; J. Najarian has long call spreads SSRI; J. Najarian has long call spreads VLO; J. Najarian has long call spreads GLW; J. Najarian is short DB; Tilson is long BAC; Tilson is long C; Tilson is long GS; Tilson is long WFC; Tilson is long NFLX; Tilson is long MSFT; Tilson is long JCP; Tilson is short FSLR; Tilson is short GMCR; Cortes is short crude; Cortes is short DB; Cortes is short BAC; Cortes is short Aussie; P. Najarian is long AAPL; P. Najarian is long BX; P. Najarian is long C; P. Najarian is long MSFT; P. Najarian is long TCK; P. Najarian has long calls STI; P. Najarian has long calls FCX; P. Najarian has long calls AAPL; P. Najarian has long calls AEO; P. Najarian has long calls BP; P. Najarian has long calls CLF; P. Najarian has long calls HAL; P. Najarian has long calls NBR; P. Najarian has long calls X; P. Najarian has long calls NBR; P. Najarian has long calls X; P. Najarian has long calls SSRI; P. Najarian has long calls SLV; P. Najarian has long calls FWLT; Gartman is long gold in US dollar; Gartman is long Euro’ Gartman is long Yen terms
For Jeffry Bencik
I, Jeffrey Bencik, CFA, hereby certify that the views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers referred to in this document. Furthermore, no part of my compensation was, is or will be, directly or indirectly, related to the specific (FSLR) recommendation or views expressed in this report.
For Robert Greifeld
CNBC.com with wires.