Back in June, I decided to put my money where my mouth is and buy $1,000 of Facebook stock. I got 30 shares for roughly $31/share and, as history now shows, FB promptly tanked to $17.73 in the following weeks — costing me nearly $400 on paper.
The stock has since rebounded a bit to ~$24, but I'm still hundreds of dollars in the red.*
So how do I feel?
Oddly, I'm still bullish on Facebook for the long term. Here's why:
Back in June, I argued four things about the future of Facebook:
- That Facebook has a long, long way to go and hasn't yet gotten beyond first gear in terms of its revenue generating products.
- That Facebook is sitting on an unimaginably large pool of valuable but untapped marketing data.
- That advertisers are still figuring out how to use Facebook, meaning that the "real" money has yet to arrive.
- And that Facebook is the biggest boat in the social media harbor, and will thus rise highest on the incoming tide.
Then a bunch of Facebook insiders cashed out, heavily diluting the stock, and driving down its price. (I expected that, although — naively — I didn't expect it to cost me nearly half my stake.)
Five months on, with the dilution mostly in the rear view mirror, those four fundamental factors about Facebook all still seem to be true — and Facebook's revenue is still growing.
When I bought FB, its Q1 2012 revenue was $1.058 billion. In Q2, it booked $1.262 billion — it's adding $100 million in revenue every three months, in other words.
And that's before it's even filled in some of the most obvious gaps in its business, such as a display ad network.
Some analysts are coming round to my point of view. Cantor Fitzgerald and Piper Jaffray both just issued positive reports on the company (although both have target prices lower than my ill-timed entry point.)
I'm not a technical investor, as my brief track record here indicates. I prefer to look at the fundamentals. And right now, I cannot imagine a scenario in which Facebook suddenly starts shrinking or becoming less attractive to the advertisers who generate its revenue.
A few more months of this and maybe I'll get my money back.
*If you are one of those people who does not believe $400 is a lot of money, then please send a check made out to me personally for that sum, c/o Business Insider, 257 Park Avenue South, NYC NY 10010.
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