Now, before everyone starts yelling, “You can’t compare a social networking site to a solar company,” I’d like to add that I know the two operate in different industries. However, neither are what you would call “traditional” in either technology or solar, and are vastly overvalued relative to each industry. Both trade as momentum stocks, and far exceed a valuation that is rationale compared to fundamentals. So, although I believe that LinkedIn is beyond overvalued compared to fundamentals; it actually ‘looks” cheap when you compare it to the valuation of SolarCity.
A Great Short Opportunity
When we look at SolarCity compared to LinkedIn Corp (NYSE:LNKD), you begin to realize that LinkedIn looks like a value investment. Aside from better growth and a more attractive valuation, LinkedIn is also profitable, with operating margins of 6.31%. On the other hand, SolarCity has operating margins of (53.52%). With that said, I think SolarCity makes for an incredible short opportunity. The stock has seen a bubble-like rally and is just around the corner from a large June 11 lockup expiration. While many retail investors are bullish and are excited about the immediate gains, I believe we will see smarter money (board members and executives) sell shares quite quickly, as any logical person can see how expensive this stock is trading.
The article This Stock Makes LinkedIn Look Cheap! originally appeared on Fool.com and is written by Brian Nichols.
Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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