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Facebook, Inc. (FB) Message Board

  • investora2z investora2z Jul 6, 2013 6:53 AM Flag

    Sluggish and weak

    The price targets have been increased by many analysts, but the performance of the stock remains sluggish. It is now well below the offer price and has never even come close to it during the past one year. Some of the price targets are around $60. Those forecasts do not make sense if one goes by pure valuations and expected increase in earnings. Even if a P/E of 50 is taken to be acceptable after a couple of years, the earnings have to multiply several times during the period. Difficult to understand this from pure valuations point of view. People arguing in favor of this stock will value it based on future growth prospects and the power of the brand or ability to monetize its user base. But even all that does not sound very promising. The competition is increasing and it may not be that easy to retain the user interest. Many analysts are saying that the younger crowd is shifting to other sites like Tumblr, Pintrest etc. New multi-lingual social platforms like the one created by a start up Yappn (YPPN) are about to be launched soon. With Yahoo (YHOO), Google (GOOG) etc., focusing on this segment, the road ahead is not easy. Not to say that Facebook will not grow, but it will be difficult to reach substantially higher from here and be reasonably valued at the same time. In any case, it has to first cross $29, then $32 and then $38. Again, that seems difficult to imagine at this time. Stranger things have happened in the market, and stocks like LinkedIn (LNKD) are also trading at strange valuations, and getting stronger. So nothing can be ruled out, but fundamentals will need lot of catching up to do, and fast. The upcoming earnings will determine the short term trend.

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