There isn't likely a more controversial stock in the market right now than Facebook (OK, maybe Apple)
Facebook's share price is around $26 now, making the company worth (market capitalization) of $62 billion dollars. It's down from it's initial offering price of $37 and up from it's 52 week low of $17 and change.
None of that means anything to the upbeat investor. What's important is what does a share of stock buy you? Facebook pays no dividends, so the only return you will get is from capital appreciation. The price/earnings ratio (P/E) is currently 559 according to Yahoo! Finance. Which means at the current rate of income, you will get your money back in 559 years. Past the year 2525, if man is still alive.
Clearly, no one would buy a stock on this metric. The only reason to own Facebook is if you believe those earnings will increase, and in this case, increase substantially.
Now, you may love Facebook, you may use it all time, and think they will be able to make a lot of money through selling ads and other forms of monetization. But everything will have to go right for them to make enough money to justify that price. And things rarely do.
Upbeat investor call: Definitely "don't like"
The author has no current position in any of the stocks mentioned in this article, and no plans to purchase any in the next 48 hours.
No comments:
Post a Comment