+ Watch FB
on My Watchlist
Somebody hold me back - even after pointing out that it's usually a mistake to red thumb great companies on valuation, I literally can't help myself from red thumbing FB around $70. Sigh.http://caps.fool.com/Blogs/unsuccessful-trades/921119Their market cap is enormous, and the WhatsApp acquisition strongly suggests that Zuckerberg isn't good at capital allocation, which becomes more important as the business grows up.
Facebook continues to innovate the market of social media. growing pains will cause this stock to stumble but I see upward arc for intuitive social media willing to risk uncharted waters.
Paying Facebook to "promote" your post is just starting to get acceptance as a legitimate means to advertise your business.Not only that, but companies like Adroll are attracting big accounts to Facebook retargeting ads.Best off, any SMB can get started with less than $100 to broadcast their messaging.Facebook has a long run-way ahead of it on revenue growth.
Their momentum should continue over the short term, their long term performance will be dependent on how well they can keep relevant.
nobody needs marketing spam in their social media environment
The nature of leisure/entertaiment social media is that it gets passe. Hot pasttimes of one generation rarely make it to the next generation in the same large numbers. FB's recent purchase of Whatsapp underscores this. It does nothing to broaden their base or prepare for an expanded purpose scope, to prepare for a future. It was all about the temperal framework in which FB already dominates. Moreover, I doubt that the majority new users are individuals from the generation. For-profit and not-for-profit entities have a sizeable number of pages, which can be a nice thing to have out in the universe, but this is not the kind of market penetration that is needed.
Good Management and Growth potential.
mark will reward you
iconic, unbeatable in social media for the foreseeable future & will price like AAPL or GOOG within 2 years
they have so much data on their users
Seems to be turning into a utility.Can any other company take over Facebook's function? Twitter is different. Lnkd is different. Google + is lame
Smartest guys in the room with the drive to not be beat
I don't care how cool you think Facebook is. It's simple outrageously overvalued at its current price.Let's compare Facebook with McDonalds:Facebook market cap: 173.5 BillionFacebook's annual profit: 1.5 BillionDividend: 0McDonald's market cap: 95.27 BillionMcDonald's annual profit: 5.6 BillionDividend: 3.38%Facebook only makes 1.5 billion despite have 1.3 billion current users. To justify it's market cap, Facebook would need to make about more than 17 billion (this would be to create a comparable annual profit compared to McDonalds, and this is even without offering a dividend). That means the only way Facebook's current market price would be justified would be if it had an active use base of more than 14 billion, 750 million. Unless you're predicting populations increasing exponentially, and everyone actively selling their souls to Facebook, this stock is an obvious underperform. The current market price is one which predicts growth that is literally impossible.
Here’s my attempt at a Charlie Munger style “inversion” type thought process.FB is selling today at about at $66.50 per share, and for FB to be a worthwhile idea, I’d like to see at least 10% or better annualized returns over the next 5 years or so, with a high level of confidence. So, at today’s prices, to achieve that desired 10% annualized return, FB shares would be selling for about $107 per share, or more, in about 5 years. So what has to happen for FB to be rationally worth $107 in five years? What has to happen for FB NOT to be worth $107 in 5 or so years?Call me old fashioned, but I think it’s extraordinarily rare that a business is rationally worth paying more than 30x earnings for. So I’ll use 30x as my future multiple in this example. [Let’s pause for a quick commercial. Yes, 30x is a highly subjective multiple. I encourage you to replace that multiple that of your own choosing, and then recalculate for yourself. And, please, PLEASE, if you can come up with a more rational future earnings or cash flow number, and accompanying multiple, that justifies the current valuation, PLEASE share it in the comment section. I’d love to hear it.]So, I’ll assume FB is selling at 30x earnings in 5 years. $107 per share/30x = $3.57 earnings per share.Now I look at FB and say, ok, what are the chances that FB will be earning $3.57 or more per share in earnings and/or free cash flow in about 5 years? More importantly, what are the chances they'll be earning less? Is this a bet I really want to make?Compared to $0.60 in EPS and $1.14 in fee cash flow, in the last year, we’d basically NEED Facebook to be bringing in AT LEAST 3 to 6 TIMES as much profit in 5 years than they are bringing in today.How many companies can you REALLY count on to grow at such an astounding rate? Are there any? Is Facebook REALLY that special? I believe a rational bet on FB today requires a prospective investor to believe, with a high degree of certainty, that the odds are very LOW, that FB WON’T grow earnings and free cash flows by at least 300%-600% over the next 5 or so years.You’re basically betting that FB will be the greatest company of call time. With a bet like this, if ANYTHING goes even slightly wrong, you’re in VERY big trouble.While most investors concentrate on how much they will gain if their assumptions are correct, I think truly intelligent investing is as much, or perhaps more so, about how much you stand to lose if you’re wrong.Great investors look for positive asymmetrical bets. (Heads I win big, tails I still do ok) Facebook, to me seems more like “heads I do ok, tails I lose A LOT of money.” That seems like a pretty crazy bet to me. Underperform.
The most appropriate reaction to the WhatsApp deal: http://www.youtube.com/watch?v=PpX0DqlEdrM
Can't believe I didn't have this in CAPS earlier. This is an astonishingly great company that is looking to change the world. As long as Mark Zuckerberg is at the helm, Facebook will have the motivation it needs to successfully outperform the market for years to come. HOLD for 5+ years, and in 2019, reexamine the social space, and Facebook's role in the industry.
I see their business model as an affiliate program on steroids, but ... that's it. Nothing overly complicated in terms of their revenue stream. Based on DCF/Relative Valuation model = fair value is $58.00 and the 30% MoS sell point is $75.40. Not quite at the sell point, but overvalued (supported by 1.6 PEG).Given high P/E, I'm not a fan of holding such a position when markets are skittish. I see the price drawing back by mid-2014 to the mid-$50s, or 15% price correction.
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