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In our view, Salesforce.com's (NYSE:CRM) yo-yo ride from $160 to $96 and back to $144 is the sign of a bubble that just won't pop. The action in the stock has been truly nauseating for longs and shorts alike over the past year and I can't see how the rally will hold during the next Europe-crazed sell-off in the overall market.

CRM shares have recovered some 44% YTD. This stock is a bucking bronco that surely cost traders both long and short this year with its incredible whipsaw trading action. Traders have faced their ripoff while getting their faces ripped off all in the span of two months ...

CRM shares nearly hit the $160 mark last summer before trading below $100 briefly in January. Now, CRM bulls are once again in control of the rodeo, but we wonder if they are about to get knocked out of the saddle thanks to an overvalued market and CRM's own overvalued fundamentals.

While the stock looks cheap to many investors at 70X 2014 projected earnings estimates and a reputation as the fastest growing name in technology investors seem to think CRM is a good buy right now. That said, many dyed in the wool value investors think that companies who aren't earning money should trade at or below book value or for a reasonable multiple on revenue and growth if they are expected to earn profits in future periods. Longs argue that on a discounted cash flow basis CRM is cheap given their growth rate expectations, but again they fail to consider any curve balls that influence that analysis.

In CRM's case, the assets are virtual and while they do show impressive revenue growth, we wonder if they are truly immune to competition as the investment community believes. Microsoft (NASDAQ:MSFT), long considered a dinosaur on the Cloud Computing scene, has invested heavily in Cloud Computing. For investors looking to play in the cloud space I would invest in an Oracle (NYSE:ORCL) or Emerson (NYSE:EMC). Waiting for an F5 Networks (NASDAQ:FFIV) to trade at a reasonable multiple of earnings in our view is a much safer way to invest in this trend.

As for the technicals, this is where I see a trade lining up for short sellers to make some decent money. CRM is up 50% in a very short period of time and has left an unfilled gap between $140 and $133. I would look to either sell a bear call spread on this stock or buy an in the money put option -- just look at the severely overbought RSI and MACD.


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Source: Salesforce.com: An Overbought And Overvalued Stock To Short