$5.50 would be a P/E of 30:1 and would be a fair valuation. The question is is FB a fad or a viable long term investment? It amazes me how so many zuckers are paying well over 5 times value. It's like paying $1 million for a house that appraised for $200,000. I don't get it.
Indeed if FB had gone public 3 years ago, had a stable business model, didn't have the #1 most trafficked web site in history, already had a film made about it, built an entire mobile ad revenue stream in less than a year, and if the only comparable stock, LNKD, weren't valued at 600x earnings, FB would be fairly priced at a little over BV, perhaps at $10.
But that is not the case. Be objective folks. Get real. This isn't just another stock. It has more users and more user data than any other single web site in history. It also engenders more smoke mirrors antipathy and heat and bashing than any other IPO in history because we're in the internet era and everyone has an opinion.
The stock was valued internally at FB before the IPO at $29, and that's where it is now after the most abysmal blast of bashing bad news bad PR and awful guidance. Benjamin Graham valuations don't yet apply to FB folks. In two years, FB will be fully matured, then you can blast and rant all you want about BV. Right now the stock has been thru the ringer and is still doing quite well at about $30.
apples forward p/e will plunge into the single digits in 2013 before soaring well over the hundreds in 2014, why? forward growth. location,location, location, it's a funny thing.
so apples earnings will turn negative by 2014 and cause a nose-bleed spike in p/e while facebook monetizes her 680 billion users. so says the market for right now.
hope this helps.
Check out google's PE ratio the first year or so it was out (over 100). Look at AMZN's PE now. Here's what you are missing: Having a high P/E ratio is common if you are heavily investing for the future. Actually, it is quite healthy. Think of it this way, if FB all of a sudden spent half or a quarter of what it is currently spending on R & D, what would it's P/E be? Also, if this were it's P/E and it's investment in R & D, would you be more or less likely to buy. Be honest.
I'm less likely to buy into a company that is not forthcoming about it's stats. For instance, FB claims to have well over a billion, unique users. The world population is 6.9 billion, take away China and most of the middle east where FB is banned (about 1.6 billion) leaves 5.3B. Then take way 25% of the global population b/c under age 13 (about 1.3 billion) leaves 4 billion. Then take away undeveloped countries that don't have access, elderly population that has no interest in FB, and incarcerated people who can't use it (roughly another billion). This leaves about 3 billion potential users.
Therefore, I find it very unlikely that 1 out of 7 (total global population) and extremely unlikely 1 out of 3 (adjusted population) use FB. That's 33% which I believe is a highly inflated membership stat. Even if it were true, how many of the 1 billion are ACTIVE users who use FB on a regular basis, click on ads, and pay for something? I posit it more likely 33% of them only created a profile, used it occasionally, then moved on without spending a penny. Advertisers will eventually figure this out.
There is no such thing as a fair price based on P/E.
As an example, tell me why Boulder Brands (BDBD) (maker of Smart Balance Butter Spreads) has a 452 P/E, with the stock near a yearly high?
There are literally scores of stocks that fit in the same category.
Some will say that a high P/E means that future expectations are high. Sometimes it's right, and sometimes its wrong.
Ghost...stocks never sell for what they are worth! They sell for what the street THINKS they are worth. While PE is one indicator, never fall in love with history. Some sell for a PE of 3. Some sell for a PE of 1,000. Why? Perception of future value by investors.
Remember this & you will avoid some major losses & possibly make some nice coin.
Thanks for the reply but I've always been more of a hard #s and data sort of guy than a speculator.Back in the late 90's I was living it up during the dotcom bubble but also took a very hard fall as well. It was all about hype over substance back then and I get that same kind of vibe from FB. Taking calculated risks can sometimes be well rewarded but it's a double edged sword. I just feel like FB hasn't proven itself as a solid and sustainable going concern, in my opinion. I guess time will tell.