For most of 2010, investors have loved Motricity
AT&T
Big-money buyers like that pitch: Motricity shares have more than doubled since the June IPO. Yet there are signs that investors' love affair with the stock may be ending. Shares of Motricity are down more than 16% for the week.
Several All-Star Fools have recently shorted the stock in Motley Fool CAPS, including amyers1, orhein, and RedondoGolfer. These and other bears sense Motricity has risen too far, too fast. Also, next week marks the end of the IPO lockup period that prohibits insiders from selling shares for a quick buck.
"[Motricity's] 180-day selling restricted period soon comes to an end. More than 100K shares were sold in five minutes this morning below $30," Foolish investor cashsage wrote on Dec. 1.
Fools fear that insiders will dump Motricity as soon as they're able, creating a wave of selling that would send the stock careening back toward to its pre-IPO price of $10 a share.
I doubt we'll see that much of a drop, but Motricity's situation is hardly unique. Another tech IPO from earlier this year, Qlik Technologies
Frankly, I'm hoping the bears are right and Motricity suffers a short-term sell-off. I'm convinced there's enough long-term growth here to deliver multibagger gains.
The math convinces me. Analysts are forecasting that normalized net income will rise sevenfold over the next two years. Even if you assume they're too optimistic -- and they usually are -- Motricity's forward valuation of 35 times earnings looks cheap for a company growing at such a rapid pace.
Now it's your turn to weigh in. Is Motricity overpriced? Please vote in the poll below and then leave a comment to explain your thinking.
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