Facebook

[Schneed10]

Originally Posted by over the mountain

i dont know why i am even venturing into the school yard but .....

I agree with skinsguy on the one point he has - facebook needs to keep buying out other start ups and apps to stay profitable. facebook by itself will continue to have new similar digital media platforms/apps that will become the flavor du jour.

facebook shares were plateaued at 40 +/- for a long time until 2013 when they created buzz by buying out Israel's popular social app Onazo (something like that). Since then shares jumped to 80 and have again plateaued.

unless facebook keeps buying up start ups to stay relevant, facebook by itself is obsolete. Its not like google, where google has no competition. yahoo tries to challenge in the market by buying einvite but no one can compete with google's search machine or buying power.

im going to sell half my facebook if it slips or they dont generate more buy out buzz. ive already doubled my money, may be time to hop off before the train slows down too much.

facebook, by itself, is dead and there is no way they can keep buying start ups to control the industry.



...... troll on

I'll set aside my troll hat and put on my MBA in Finance hat (note I'm not taking off my pompous asshole hat).

You reference the stock price and the profitability as if they're one in the same. You seem like you understand the difference but it's nuanced so I'll explain.

Facebook's stock price is currently $82, which is trading at 76 times earnings (76.0 PE ratio). The stock price has soared to 82 because of the expectations for profitability that it has built up amongst investors as a direct result of the acquisitions you quite rightly point out.

But those expectations are unrealistic. To justify a stock price that high Facebook's earnings would have to be insane. When it becomes obvious to the investor community that they will inevitably fail to meet such lofty expectations, the stock price will drop. So yes I'm with you, if I were you I would shed some shares based simply on the reality that it's overvalued due to (good old Greenspan...) irrational exuberance.

But none of this is to say that Facebook won't continue to be profitable and won't continue to dominate the social network space. The stock price might belong closer to $40 per share, but that's not to say there's a single social network that represents even a remote threat at present. And it's certainly not to say that Facebook doesn't have the human or financial capital to continue playing defense and buying up other platforms. It will definitely continue to grow and generate large profits. It just won't do so at a rate strong enough to justify a $82 stock price.

Facebook's stock price may be due for a precipitous decline but the company's market position is as firmly entrenched as a market leader in its respective space as any firm out there.