Go Martha! Go Martha!

I've with great interest been following the Martha madness since she got out of prison. Not that I'm that interested in her or her products. I think she represents a very old world view and stuffy attitude towards such fun activities as cooking and gardening. I understand that she doesn't try to cater to my consumer needs and if she did she would be in trouble. No, she is looking to satisfy the house wife from the fifties that honors matching pillow tops and having the meal ready when the husband arrives.

My interest is purely financial. I noticed on the day of her release that her stock was hitting an almost all-time high of $37 intra-day. I looked through the key statistics: current earnings, future growth (top and bottom line) as well as guidance. I wanted to find out where this mega growth was going to come from that the stock price implied. I mean, the stock had gone from around $10 in the middle of last year to $37 last friday. There has to be a story, I thought!

I did the math in my crazy mind giving MSO a generous P/E of 30 and therefor a projected EBITDA of $62MM this year. I quickly found out that the company LOST over $60MM last year and is not planning to get back in black until 2006. The P/E on Friday was 800 and the top line growth negative.

Hmm, this is the first no-brainer short I've seen for a long time, I thought. The company doesn't make money, is not planning to make money and former executives are selling their stocks. It just have to get a Fibonacci haircut, possible retracement of 38%, 50% or even 62%. We have so far seen a drop of 32% in 4 trading days and my target is $18 within the next 3-4 days. But it could get close to $10 in a few weeks.

Martha - I'm slowly becoming a great fan! ;)