A Stock to Short and a stock not to dream of shorting

There are two stocks that my friends are talking about shorting now.

One is Amazon. This makes sense to me. The stock has risen to crazy highs on a short squeeze because those who shorted it earlier are having nightmares about Amazon going through the roof again. It isn't going to happen. This company is a good one with good service, but they don't do anything that everybody else can't do on the internet. Their margins are so thin that they are actually going to lose money on every Harry Potter book that they sell with free shipping. With the stock at 73, it is supposed to earning 0.15 when they report on Tuesday and to earn $1 for all of 2007. So, it is trading at 73 times current earnings. Next years estimates are for earnings of 1.32 which are a stretch as so much of its 2007 earnings have come from accounting changes. Even if they earn 1.32 in 2008, it is still trading at a PE to growth ratio of well over 2. I don't think that is sustainable. The stock needs to come down.

Another is Apple. The only justification that I see for shorting Apple is that what goes up must come down and that isn't going to be the case with this thing. Even with the stock at 141, it has a current PE ratio of 44 and a forward PE of 33. The PEG is below 1.70 based on current estimates and estimates for future growth are likely to be revised up on iPod sales alone (without the iPhone). They did a wonderful job of unveiling the iPhone to great fanfare two days before the end of the quarter. They sold iPhones - and even if you think that they sold very few - they are going to have a positive impact on this quarter. Don't even dream of shorting it into earnings on July 26.