Tesla and Amazon drive the shorts crazy

The shorting process is lifting these stocks and making them hard to value.

By Jim Cramer May 17, 2013 9:12AM

thestreet logoHard-to-value stocks are such bummers. How do you value a car company that makes only 21,000 cars, even as it makes money on them? How do you value an online company that dominates Internet commerce?

 

The answer is simple: You don't. You can't. You can't, because there's a confluence, an actual formula, for what's going on here. You take a service or product that is much loved, you verify constantly that it is loved, whether it be because of the rapid adoption of the online service or a terrific rating in Consumer Reports, and you add in sudden profitability and a chance for long-term dominance and then sprinkle on nonbelievers who short the stock because the usual valuation works are defied, and they can't be defied forever. The result? You get Tesla Motors (TSLA) at $10 billion, and you get Amazon (AMZN) at 220 times earnings.


Now, the mechanics of the stock market are working in favor of these two stocks -- the mechanics meaning the difficulty of the short-selling process. You can't just sell stock when you short; you have to borrow stock to sell it, and that has been very difficult in the case of Tesla, where 41% of the stock is sold short. Anyone who buys this stock is the enemy of the shorts, because the shorts are going to demand that stock. The shorts are frantic to find stock, and when they can't, the brokers just buy the stock in to cover the short.


Arrow Up Green © Image Source SuperStockAmazon is a stock that seasoned professionals think it is their duty to short. They feel it is just very important to bet against a company with that high a price-to-earnings ratio.

 

The shorts don't care that Amazon might take over the world. They think it is priced as if it will. Which means there is nowhere but down. But the bulls say that the company is spending like crazy to be the biggest and the best, and that means that when it wants to, it will show the profitability that makes the price-to-earnings multiple much lower.

 

Tesla? What can I say? The simple truth is that it is a really cool car, and my friends who have them love them. I would like to get one. I bet that many who are short the stock would like to get one. In the meantime, the CEO does an equity offering to pay off a despised government loan, and the CEO buys a ton of it! That was supposed to be the chance for the shorts to cover.

 

No such luck. Not enough stock. So the short-busting continues.

I know when I can value something, and I know when I can't. I can't value either of these companies, so my bottom line is that they are dangerous both ways, for gamblers who gamble without an edge, so count me out. I will let others do the wagering. 

 

cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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83Comments
May 17, 2013 11:39AM
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jimmy is the wise sage telling us it's raining after we're all wet.

May 17, 2013 9:49AM
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Rumor out of China is gold is being pushed down to 1300 by the shorts and then everyone will pile back in.  If you are in need of exciting volitility Gold is the place, at least for now.  If you are afraid of going short; which I would be at this point, be patient and jump back in for a ride up around 1300.  And yes the actual Gold is in very short supply in India and China,  just google supply of Gold in China if you are a non believer.  I think Gold is priced the inverse of this market in terms of valuation.  In other words Gold is priced like nobody wants it and stocks are priced like everyone can't live without them.  Strange days we are living in.    JMHO
May 17, 2013 11:56AM
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If you shorted this market the last 4 years you`re on food stamps with the

sewer rats in NY.If you`re lucky you live in a refrigerator box.

May 17, 2013 12:23PM
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I have made a TON of money going against cramer's advice .......

My favorite was 2008 on The Morning Show .....STAY OUT OF THE MARKET IF YOU NEED YOUR MONEY IN 5 YEARS !!

Nice ball cupping though monica ....maybe uncle jimbo will tell you what a real man you are .....oh how that makes me chuckle .... ;)
May 17, 2013 12:18PM
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And since we are going political today ......

2011 President Obama requests funding for Embassy security ......repubs (tea baggers) cut $128 million for 2011 and $331 million in 2012 ...Hillary Clinton warns  that the cuts will "be detrimental to America's Nation Security" .....do they care - do they **** !

After 2014 the GOP will realize that being led by the nose by a few greedy old men ....(most of them who have foreign interests over American ones) ...is getting them nowhere ....only then will we get back to at least some civility in politics and putting AMERICA first and not their bank accounts ...

I approve this message! 


May 17, 2013 12:26PM
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Lt. Danz here today; Miss Lilly is cracking the whip.....Says enough on here...Bye,bye..

Gotta get another Latte...On 3rd. pot.

May 17, 2013 10:19AM
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Yeah, The Markets have got my shorts twisted into a bunch...
May 17, 2013 12:10PM
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Hooray,  MONICA ABSINSKY returns !!!

And my, how fashionable he looks in that blue-and-creme colored dress....

Anyone else thinks he is a :
1)  Moron
2)  Imbecile
3)  Starved for attention or
4)  just plain old mashochist.

Thumbs up for all of the above.

May 17, 2013 12:24PM
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I make our own Lattes at Home for about a quarter; That's why we are rich..

har,har,yuk,yuk, me swabbys.

May 17, 2013 12:06PM
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Hey Monica is with us on a friday .....must have been a slow day at the White Swallow men's bathhouse .....

Did u make your kids and momwife tell you you are a real  man today .......


May 17, 2013 9:23AM
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so in other words they are well run companies selling a strong product
May 17, 2013 12:12PM
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Wall Street Rally on high consumer confidence ? Must be on another planet consumer confidence which is the middle class is in the Toilet ! They must be polling the super-rich !
May 17, 2013 1:26PM
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Bush & Dick .....Kept us Safe! Close to 10 deferrments between these patriots.


2,753 killed on 9/11 WTC

   179 killed on 9/11 Pentagon

     44 killed on on UA93

 4,800 plus troops killed in Iraq

 3,305 plus troops killed in Afghanistan

750,000 iraqi & 8000 afghani citizens killed

325 military suicides

11 Embassies attacked 60 Americans killed

  0 Tea baggers in congress “outraged”

  0 congressional hearings 


May 17, 2013 2:38PM
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Republicans -- don't you think it's about time you took your party back from the crazy pukes like puppet boy here and the koch brothers and sheldon adelson ......

The GOP used to have pride and integrity .....how low will you let it sink !!


May 17, 2013 1:29PM
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Before monica jumps in ....I actually voted for Bob Dole the first time around as for me his WW service was important and clinton seemed to be another "lapel pin flag" patriot .....having said that though BC turned out to be a good Pres, and his wife and in turn his daughter will be as well !!

; )
May 17, 2013 12:18PM
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If you can mess with the books... you're UP!!! The latest jobs research suggests that businesses are looking for: more lawyers (shysters), more accountants (bookies), more financiers (sharks) and more administrators (hustlers). Notably, the data was wholly absent of any job openings in any aspects of our society that sustain, make or supply. Recommend anything you want, Jim. Your recommendation and $4 buys you a Latte.
May 17, 2013 11:30AM
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Btw Cramer - it seems like there is absolutely no record of the street dot com or action alerts giving any charitable contributions except for press releases ......also there is no detail as to who got your "charitable donations"....

As my cockney mate would say "sounds like a bunch of porkies" .....(pork pies = lies) ....
May 17, 2013 11:25AM
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Cramer doesn't know how to value Tesla and I just don't know anything about them.  Don't they make electric sports cars?  How big is the market for that?  Anything with that low of a clearance isn't going to make it into my driveway anyway - literally, at least not without doing some damage to the under-carriage. 

As far as shorts go, currency and commodities are in and stocks are out.  The Euro has been dropping nicely and we're looking for at least another half penny down.

May 17, 2013 5:52PM
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Free market republicans in North Carolina in action ----- banning Tesla from selling cars how they want ....govt. intervention in free markets --- say it ain't so ....

The Republican Party has for years insisted that they were the party of capitalism, of the “.” However, when the opportunity to show this appears, they instead do everything they can to prevent a free market from forming. Tesla Motors is now calling them on it, after North Carolina voted on a bill designed to eliminate their direct sales model, which bypasses the traditional 3rd party dealer system. As , the new law would ban direct sales, forcing auto makers to sell through a dealer even if it is a direct purchase from the manufacturer. This directly injured Tesla’s ability to sell in the state, but even more concerning, it limits future innovation in the auto sales industry.

The  is a giveaway to the traditional auto dealer model. It protects them from competition by direct auto sales. This would not just prohibit sales from Tesla motors either, but from specialty auto manufacturers such as ,  and , who do direct sales of their vehicles. The difference between them and Tesla is that these auto makers are small, typically hand built machines with a niche market, while Tesla is a m****duction, mass marketed vehicle on par with much larger auto makers. And this is what is making the dealers very nervous.




May 17, 2013 5:18PM
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Whew....thank God some of us have actual investing stuff to do.

Alias, time to take that extra dose of Thalium...er, I mean valium!  yes,
thats it!  I meant VAL-ium.  ha ha..

Oh how Freudian of me.

Got to go count the cookies now that the DOW closed UP AGAIN...
and say, Dang you Obama!    ha ha ha ah....

Oh it does not get any better than this.

And Barry, Fat Cat is on the other site and says to
pick up your litter box when you're done spewing.

Thanks!

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