Yelp and Twitter are now bad shorts

After recent declines in their stocks, these companies look bound to become takeover targets.

By Jim Cramer May 8, 2014 10:52AM

Yelp & Twitter logos © Tim Boyle/Bloomberg via Getty Images; Bethany Clarke/Getty ImagesSo they are going to make a stand today. Morgan Stanley is trying to start it with the hold-to-buy upgrade on Yelp (YELP) and the sell-to-hold on Twitter (TWTR).


I think it is well-timed. Twitter hit my downside target of $29 Wednesday, and I'm not going to say I still hate it as much, because I'm sure there are companies that will begin to actually think about buying Twitter if they can figure out how to monetize it. The Street on MSN Money


Remember, Facebook (FB) agreed to pay $19 billion for WhatsApp, and that company had little revenue. I think Twitter could be worth the same amount, which is $2 billion more than where Twitter shares are trading. If the stock goes down another $4 or $5 and stays there, it isn't unthinkable. I do not think Twitter is a great short anymore.


Yelp is down to $3.75 billion market capitalization. I can see Yahoo (YHOO) or Google (GOOGL) paying that price for the company if the stock keeps dropping. Again, I now think that stock is a bad short. It is soon going to be too valuable to someone else.


I am talking about trajectories here, and velocity. These companies were all told that in order to get their stocks to run, they should be like Amazon (AMZN). So they adopted the Amazon model. They have all come along far enough that they have built moats that could proceed to be exploited by a flush Yahoo or a rich Apple (AAPL).


Remember, I am not saying to buy. I am saying these stocks can bounce -- and I am certainly saying that while they had been overvalued these companies have built amazing businesses that are envied by the biggest players.


No, don't buy them for takeovers. The valuations are still too high. But at this pace, that won't be for long -- and you don't want to be caught shorting a company that could turn out to be valuable to a bigger company that wants to own a growing space.


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Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio to see the stocks Cramer thinks could be winners. The portfolio is long FB, GOOGL and AAPL.




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10Comments
May 8, 2014 11:16AM
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I hear your point loud and clear Jim.  Nothing ever goes straight up or down and thinking it will can cost a bundle covering your trapped shorts.  I still think these models are vulnerable long term however as advertising and clicks has created an opportunity for some fancy footwork if you catch my drift.  Yelp could easily follow the path of so many other information referral sites such as Angies list which I believe has already been corrupted.  The temptation to control your own destiny is much to strong than to just stand by and let others dictate your success.  In a way all of these models are vulnerable in a similar manner. 
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Was I the only one to see the announcement Barclay's of the UK is going to move over 400 billion pounds of bad loans to a "bad bank" so as to clean up their balance sheets??? Was this a typo??

If not this means the end of the British pound

May 8, 2014 1:30PM
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Who is stupid-enough to take-over... nothing? Both Twitter and Yelp were fad click cliques without intelligent purpose. 
May 8, 2014 11:11AM
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So where was this Twitter target price of $29 posted .....seems like it was just in Bobo's mind --- convenient of course as he is once again telling us how right he was but without the benefit of actually predicting anything!

For the record any company that pays $4 bill or Yelp or $20 bill for twitter is insane .....all the big guys already have similar services ...also both these companies have declining revenues and customer usage.

Despite self declarations of his own genius the evidence still shows that cramer is a hack who would promote anything that makes him money.
May 8, 2014 1:29PM
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Well folks, like we said, be careful...At 1310 hrs manipulators started doing their thing so say good bye to the triple digit gains in the Dow....Still about 2 and a half hours to go...Do not trust these dirt bags as far as we can throw them....Hopefully we will be able to maintain things in the green...We shall see...Hard to make this up people. More after the close.
May 8, 2014 12:54PM
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Up triple digits and everything is great in the world, well, not exactly, its great we are up but be careful; scumbags have not left the building and after yesterday you all know they are itching to bring these markets down and down big so, be aware, still over 3 hours to go...More later.
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