Buying Facebook shares yet?

[Barkis is Willin']

According to this poll, almost 95% of dopers said no way when the IPO came out. Pretty much everyone thought it was overvalued at just over $38 at the time. Well, now it's down to about $20 after a pretty big drop in the last couple weeks. Are you interested yet? Do you think it will keep going down?

[UncleRojelio]

I don't see FB as ever being worth the risk. It exists at the whim of 13 year olds. When they lose interest, FB will evaporate like a mist.

[Justin_Bailey]

Originally Posted by UncleRojelio

I don't see FB as ever being worth the risk. It exists at the whim of 13 year olds. When they lose interest, FB will evaporate like a mist.

While I may have blundered in buying a few Facebook shares on IPO day, this is a ridiculous opinion of the company.

[friedo]

I don't think the situation is quite as dire as our good Uncle, but I am not interested in FB as a long opportunity. I like to invest in sanely-valued companies with demonstrated high P/E ratios and a solid history. So I don't ever jump on IPOs.

I still think it is overvalued at $20, but that's a gut reaction.. I'd want to see next quarter's filings before making a more detailed analysis.

[friedo]

Originally Posted by friedo

I like to invest in sanely-valued companies with demonstrated high P/E ratios and a solid history. So I don't ever jump on IPOs.

Ack, I meant low P/E ratio.

[Lancia]

Originally Posted by Justin_Bailey

While I may have blundered in buying a few Facebook shares on IPO day, this is a ridiculous opinion of the company.

May I ask why you think this is ridiculous? I think their target demographic is a bit older than 13, but I wholeheartedly agree that Facebook will quickly fade into oblivion as soon as something better comes along. MySpace certainly did. There was much discussion about this when Google+ was launched. I haven't heard much about Google+ lately so I'm guessing it didn't amount to much.

Admittedly I don't have an MBA and don't use social networking much, so I may be talking outta my ass. But Facebook isn't exactly General Electric. They don't make anything, and as far as I know their profits comes from advertising. If their number of users drop, advertisers will likewise flee. Correct?

Also (speaking as someone who knows nothing about investing), isn't investing in something like FB a bit risky simply because it's short-term? Does anybody realistically expect FB to still be around in 10 years? Don't investors want safe, long-term investments? How does FB fit into this model?

[Grumman]

Originally Posted by Lancia

Also (speaking as someone who knows nothing about investing), isn't investing in something like FB a bit risky simply because it's short-term? Does anybody realistically expect FB to still be around in 10 years? Don't investors want safe, long-term investments? How does FB fit into this model?

Presumably you invest in Facebook, then sell your shares to someone who is a slightly bigger sucker than you are. They sell their shares to a slightly bigger sucker, and so on until someone is left holding the bag when the company collapses.

[DMark]

Originally Posted by Lancia

Admittedly I don't have an MBA and don't use social networking much, so I may be talking outta my ass. But Facebook isn't exactly General Electric. They don't make anything, and as far as I know their profits comes from advertising. If their number of users drop, advertisers will likewise flee. Correct?

Also without MBA, but that would be my read as well. For all I know, Facebook might hang around 10-20 years, but I don't see any sudden spurts of growth that would warrant investment. And you just know there is something bigger and better around the corner - I have already heard a few students at my school coming up with some better ideas and alternatives to Facebook.

Back in the heyday of dot com's, they were paying millions just for domain names...how did that work out for them?

Na - I would invest in some small company working on better solar energy, or perhaps someone working on new, long life batteries, or any number of smaller, smarter techno geeks who might be on to something more substantial that could be manufactured/produced and used in multiple products.

[L. G. Butts, Ph.D.]

I think FaceBook will still be around, not with the same business model maybe, but one would hope they will adjust the strategies as needed.

Regardless, Facebook stock is still way overvalued. I might consider buying shares if it dropped to $4 or so. I believe its P/E was around 120 at $38/share.

[Turble]

I would buy at $12.

[Barkis is Willin']

Originally Posted by friedo

... So I don't ever jump on IPOs ...

Never? Sometimes jumping on an IPO can pay off huge. I'm sure there were many comparisons a few months ago, but remember Netscape's IPO? The stock price tripled in no time. Obviously, Netscape was not a good long term investment and I assume that's where most of the FB comparisons were made, hence FB's stock has been falling.

Originally Posted by Turble

I would buy at $12.

Fair enough. I think I could live with throwing some money at it at $12, hoping it would climb back up to around $20. Other factors besides just stock price would come into play of course. I do think it is currently overvalued, but the nice thing about their product is that it's relatively easy to add value, in my opinion. I don't know for sure, but they probably don't have to spend the kind of money on R&D that other companies do.

[friedo]

Originally Posted by Barkis is Willin'

Never? Sometimes jumping on an IPO can pay off huge.

For people who fancy themselves good at market timing, sure. There are equally many examples of IPOs that did not have such an inflationary effect. And God help you if you don't sell when it peaks.

Not for me. I am a big picture guy.

[markdash]

Dumb question: Does it matter how many shares of a given stock are available? The P/E ratios of two companies might be 50 and 40, but if there were twice as many shares of the first as of the second, wouldn't that affect how you valued those two stocks?

[friedo]

Originally Posted by markdash

Dumb question: Does it matter how many shares of a given stock are available? The P/E ratios of two companies might be 50 and 40, but if there were twice as many shares of the first as of the second, wouldn't that affect how you valued those two stocks?

Earnings are calculated per share, so the P/E ratio is comparing profits-per-share to earnings-per share. In other words, it's (P/s)/(E/s). The shares cancel out. The total number of shares is therefore not relevant when comparing P/Es between different companies.

[Justin_Bailey]

Originally Posted by Lancia

May I ask why you think this is ridiculous? I think their target demographic is a bit older than 13, but I wholeheartedly agree that Facebook will quickly fade into oblivion as soon as something better comes along. MySpace certainly did. There was much discussion about this when Google+ was launched. I haven't heard much about Google+ lately so I'm guessing it didn't amount to much.

Facebook has never targeted themselves to teenagers, so saying the company's fortunes hinge on the whims of a bunch of brats makes no sense at all. Yes, teenagers use it, but adults are Facebook's biggest demographic.

That said, Facebook will be around for a good long time because it has something that MySpace never had... adult acceptance. MySpace was created for 13 year olds (and the average garage band) and collapsed as soon as all those 13 year olds were allowed to start using Facebook (remember it was for college kids/adults first). So a lot of adults are on Facebook and making the leap to another service, like Google+, won't happen unless it is substantially better.

[markdash]

Originally Posted by friedo

Earnings are calculated per share, so the P/E ratio is comparing profits-per-share to earnings-per share. In other words, it's (P/s)/(E/s). The shares cancel out. The total number of shares is therefore not relevant when comparing P/Es between different companies.

Should have guessed as much, thanks.