I believe you're right about 160 or so being the downside. I've definitely changed my opinion about this stock - contrary to what alot of shorts believe (and what I previously believed), the downside on this company is unlikely to be as low as 100 for the near future. I originally predicted a decline to 75-100 by the end of quarter, but this company is showing some unusual dynamics that will likely result in price spikes into the low 300s again (if not higher). The auction count is the number one statistic every short should be watching closely. Although I was skeptical that EBAY could maintain it's growth, what has happened is the opposite: EBAY growth appears to be accelerating. In fact, at their current rate, I would not be surprised if their revenues go up 75% this quarter. Every short should be very worried about this possibility - don't tell me about PE ratios because it just won't matter this quarter if EBAY blows their numbers away. No matter how right the shorts are about valuations, it's impossible to win against the momentum produced by non-stop positive news combined with the type of growth demonstrated by EBAY. I think that EBAY will eventually slow down, but it could be a year before this happens.
I boxed my short at 225 yesterday, although I feel that the hi-100s are a likelihood in the coming week. If it goes to 160, I'm going long. Wishful thinking is not going to stop the tidalwave of hype that will push EBAY to much higher levels if revenues jump up as much as they appear at this point in the quarter.
If you're a short, and you decide to cover, be sure to box it instead of covering. As you know it's hard to get the shares, and you give up your priority if you cover. By boxing, you can easily go short again if the shares spike back to the 300s and correct for a quick gain.
For further research on this subject, carefully review Doug Fowler's auction count. The growth is mind-boggling at this point, and shows no sign of letting up - my guess is that EBAY's advertising campaign is bearing fruit. I've been also tracking Yahoo's auction count, and although it's growth is above EBAYs, it is not yet having a material impact on EBAY.
I'm sure I'm about to get a bunch of flames from shorts, but I've shorted many stocks, and have the scars to know what types of stocks to be very cautious with. EBAY is in this category. |
