A blog for students of Professor Kagan's Digital Marketing Strategy course to comment and highlight class topics. From the various channels for marketing on the internet, to SaaS and e-commerce business models, anything related to the class is fair game.
Saturday, June 02, 2012
Facebook or bust?
So... This is the first blog I've ever written. I'd like to open up the conversation by asking if you feel Facebook is worth investing in? Would you buy the stock? And of so, what's the right price?
At $38, FB priced at a 70 - 75x P/E multiple. At $27.72, where it's trading today, FB is trading at ~55x P/E (I'm assuming 40% revenue growth and constant margins). In comparison, Google trades at 13x P/E with proven 25% revenue growth. In my view FB is not attractive at it's current price, particularly with no mobile strategy.
Plus, in six months, locked up insiders will be selling. It's certainly a stock worth watching, but I'd wait to see how the shares settle out in the coming weeks/months keeping in mind there may be a glut of selling to follow. May not be worth buying until after then.
Even if Facebook is an interesting company there is still a lot of speculation interfering. I would like to wait for the situation to stabilize. For instance, the demand of shares previous to the IPO was huge and yet, the day it went public, if it weren’t because underwriters began buying at 38 USD, the return would have been negative. Did investors change their valuation of the company in a few hours? I don’t think so… I believe that such a big demand for shares before the IPO was driven by speculation and not based on fundamentals.
According to a survey conducted by Reuters, "four out of five Facebook Inc. users have never bought a product or service as a result of advertising or comments on the social network site." Will FB be able to monetize its massive amount of users? Does FB have a strong business model? I agree with Zvi, I would like to evaluate the next earning reports, as well as the subsequent ones…
3 comments:
At $38, FB priced at a 70 - 75x P/E multiple. At $27.72, where it's trading today, FB is trading at ~55x P/E (I'm assuming 40% revenue growth and constant margins). In comparison, Google trades at 13x P/E with proven 25% revenue growth. In my view FB is not attractive at it's current price, particularly with no mobile strategy.
Plus, in six months, locked up insiders will be selling. It's certainly a stock worth watching, but I'd wait to see how the shares settle out in the coming weeks/months keeping in mind there may be a glut of selling to follow. May not be worth buying until after then.
Happy to share my model / valuation with you!
Marisa
I think thats a great question Charon but I would really like to see their next earnings reports and management's guidance.
Even if Facebook is an interesting company there is still a lot of speculation interfering. I would like to wait for the situation to stabilize. For instance, the demand of shares previous to the IPO was huge and yet, the day it went public, if it weren’t because underwriters began buying at 38 USD, the return would have been negative. Did investors change their valuation of the company in a few hours? I don’t think so… I believe that such a big demand for shares before the IPO was driven by speculation and not based on fundamentals.
According to a survey conducted by Reuters, "four out of five Facebook Inc. users have never bought a product or service as a result of advertising or comments on the social network site." Will FB be able to monetize its massive amount of users? Does FB have a strong business model? I agree with Zvi, I would like to evaluate the next earning reports, as well as the subsequent ones…
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