Facebook IPO watch.

[OCGuy]

A company that doesn't actually create a product had a massively overhyped IPO?

Did I just have a flashback to 90s/early 00s?

 

[abaez]

That is what I said before. It is rumoured that Facebook people have been visiting Blackberry head office several times. With RIM problems they are ripe for a buy out and FB has the cash. Watch out apple!!!!

I'm sure Apple is shaking in their boots.

 

[13Gigatons]

I'm buying when it reaches $12 a share.

 

[adlep]

That is what I said before. It is rumoured that Facebook people have been visiting Blackberry head office several times. With RIM problems they are ripe for a buy out and FB has the cash. Watch out apple!!!!

 

[lothar]

That is what I said before. It is rumoured that Facebook people have been visiting Blackberry head office several times. With RIM problems they are ripe for a buy out and FB has the cash. Watch out apple!!!!

Not sure if serious...

 

[gevorg]

The biggest value in RIMM is their patent portfolio, which is what Facebook or anyone else would be after if they'll buy RIMM.

 

[Destiny]

The biggest value in RIMM is their patent portfolio, which is what Facebook or anyone else would be after if they'll buy RIMM.

I would not be surprised if FB buys RIMM for their patents and Opera for their web browser... Facebook kind of have to in order for them to move beyond the "social network" company mentality...

Any good tech company such as Apple and Google were able to adapt, successfully introduce products to increase growth/revenue, and adjust to economic environments... and both have Cash and little debt to weather out the economic turmoil. Which is why FB had to sell shares to get cash for their upcoming projects... Apple and Google did have their failures, but they were able to adjust/adapt and move on...

And if anyone is wondering... yes, I have a 4 year degree in Business: Finance, taking courses specializing in wealth management, Futures & Options, International Finance and Securities Analyst... :biggrin:

These are all my own opinions formed from information gathered from what is already available to the public...

Facebook trading at 100+ or 70+ times their net income per share? That is like me asking one dollar from you and promising to give you a "penny" for the next 100 quarterly earnings (25 years)... Think about it... Google and Apple the two biggest tech companys and their P/E ratios are only between 10 to 20 P/E...and they generate alot more revenue than FB...

 

[Fritzo]

I'm buying when it reaches $12 a share.

You may get your wish. Analysts this morning were saying it could go down to $7.50

It's officially the worst IPO ever introduced.

 

[Eug]

You may get your wish. Analysts this morning were saying it could go down to $7.50

The analysts are jumping on the bandwagon again. When the IPO price was set to be $30+, the analysts were saying the institutional investors were going to make out like bandits, on the backs of retail investors paying $50 for this stock.

Now that they've been proven wrong, they've swung heavily in the opposite direction.

 

[SP33Demon]

First look at the fundamentals to weed out the hype... More established companies such as Apple and Google are trading at a P/E ratio of between 10 and 20 during a "bad economy." FB IPO share prices were trading at a P/E ratio of over 100!! Which raises a red flag already surrounding the IPO...

The only way that FB stock will double is:

1) Its Net Income Doubles
2) It introduces a NEW revolutionary product that can take potential earnings to another level.

As a CEO, Mark Zuckerberg's primary goal is to increase shareholder wealth and the only way to do that is to increase net profit with these two ways:

1) Increase Revenue
2) Decrease costs

If Zuckerberg can increase revenue by implmenting both = SUPER CEO

Or if he goes with only option# 1, an inverse relationship may happen because their main revenue generating product is selling advertisement. By increasing more revenue by increasing advertisments = may lose FB members = decrease or slow growth. Which may lead to decrease in shareholder wealth = stock tanks

If he goes with option#2 he may lose talented executives and or developers/software engineers to their rivals = new competitor comes out of the blue and FB becomes like Myspace and Friendster.

The main reason for the IPO is to get enough cash to buy out the "next big hype" or buy out their competitors like instagram...

Or the equity holders wanting to cash out because they noticed growth is slowing...

Just from my simple analysis if FB doesn't do something soon to increase revenue.. the P/E ratio may drop to a more "believeable" P/E 20 = stock price would be about $9 per share give or take some change...

Mr. Logical, please explain the "revolutionary new product" to warrant LinkedIn's 600 P/E which allowed the stock to double in a year? That's right, you cannot, like the rest of us. The sooner you realize that the market trades off of emotion, the better off you will be. The first couple years of a stock's price is like the weather, to act like you know the forecast only sets you up for failure. I do agree with you in the long run, however, but we are talking short term profit.

 

[Fritzo]

The analysts are jumping on the bandwagon again. When the IPO price was set to be $30+, the analysts were saying the institutional investors were going to make out like bandits, on the backs of retail investors paying $50 for this stock.

Now that they've been proven wrong, they've swung heavily in the opposite direction.

Maybe not. This is an interesting read- Facebook stock price was based on ONE HUNDRED TIMES the company's earnings. Nobody's done that before, and it is really a stupid move:

http://www.investorplace.com/2012/0...h-7-50-a-share-at-best-fb-aapl-goog-ms-gm-gs/

Duh on you if you bought the Facebook (NASDAQ:FB) IPO. Double duh if you’re thinking of buying Facebook stock now that it’s fallen to $32 a share and lost $17.16 billion off its initial $104 billion valuation. The company is only worth about $7.50 a share.

And, no. That’s not a typo. There is no missing zero or a placeholder. That’s reality.

What is ludicrous is that Morgan Stanley (NYSE:MS) and Facebook executives thought the company merited a $104 billion valuation at 100 times earnings. As my good friend Barry Ritholtz pointed out recently, both Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) debuted at about 15 times earnings. Today they trade at 13.6 and 18.2 times earnings and 3.75 and 4.9 times sales respectively.

As I type, Facebook’s market cap is $86.84 billion and its price-to-sales is ridiculously high at 21.01. I think that’s way out of line.

So what should the numbers be?

Try this on for size. If we use Google’s price-to-sales ratio of 4.9 (and I am being generous here for discussion purposes), that equals a total market cap of $20.24 billion, or 76.68% lower than where it’s trading today.

With 2.74 billion shares outstanding, that’s equal to only $7.39-$7.50 per share.

No doubt I’ll get the evil eye from the Facebook faithful and Morgan Stanley for saying this, but think about it.

Revenue already is slowing, and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people. Worse, startups already are cannibalizing Facebook’s user base as concerns over privacy and who-likes-who mount.

Companies like General Motors (NYSE:GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone. More undoubtedly will head out the door for the same reason, since Facebook friends don’t necessarily translate into revenue.

Corporate buyers are beginning to figure out that advertising on Facebook simply is not cost effective versus other media alternatives — gasp — including good old-fashioned television and radio advertising, billboards and trade shows.

Facebook Stock: At the Mercy of the Merely Curious
Many people think this isn’t a big deal. They couldn’t be more wrong.

Facebook serves up its ads while you’re kibitzing about your latest trip or checking out pictures of your family’s newest arrival. This is very different from how Google works, for example. Google’s adverts appear after a customer has already entered search terms and refined the results they want to see. Facebook’s approach is like pissing in the wind — and about as effective. In practical terms, what this means is Google search advertisers know that those who click on their ads are already hunting, so they’re willing to pay a few hundred dollars to acquire a paying customer.

Facebook advertisers, on the other hand, are at the mercy of the merely curious. That means the acquisition cost can be dramatically higher, perhaps even into the thousands of dollars. There are very few business models and products where that kind of marketing expense is “worth” it.

Then there’s the whole “like” thing.

That’s badly flawed — the Internet equivalent of signing somebody’s yearbook in high school.

According to the technology savvy wunderkids at Facebook, “likes” are supposed to open up a magnificent relationship between prospective customers and the brands they “like.”

Maybe this worked at Harvard when you were talking about bars, people and local hangouts, but I don’t buy that it’s going to translate into real sales. So what if you become a company’s friend?

When you “like” something, you get a stream of information from the “likee” that appears on your personal Facebook wall. Go on a “like” binge one day, and suddenly you’ve got 20 or 30 streams of information coming in right next to pictures of your hot-rod buddies or school chums.

Over time, what happens is users tend to block out these streams in yet another never-ending battle to screen out visual vomit, thereby robbing companies of the very connection they crave.

Your initial “like” never goes away, but depending on the barrage of information you receive I submit that brand negativity actually builds up.

If I “like” a genre-specific museum that’s just opened up in town, I don’t want to see totally unrelated posts about nearby milkshake parlors issued by the museum in a pathetic attempt to keep their brand front and center on my “wall.”

The real measure of any business is how it handles the “dislike” button — but Facebook doesn’t offer that.

 

[Eug]

Maybe not. This is an interesting read- Facebook stock price was based on ONE HUNDRED TIMES the company's earnings. Nobody's done that before, and it is really a stupid move:

http://www.investorplace.com/2012/0...h-7-50-a-share-at-best-fb-aapl-goog-ms-gm-gs/

Like I said, the analysts are flocking to these doom-and-gloom predictions after the fact. The point that some of the negative predictions have some merit is besides the point. I'd take their opinions more seriously if they were so adamant about this before the IPO.

 

[Genx87]

Heh with th enegative hype behind the stock. I would expect it to drop into the PE range of Apple or Google. At 10 P\E wouldnt that put their stock about 5-7 bucks?

 

[Rudee]

The lows will come in December when investors start to sell their shares for tax loss selling purposes. I expect the stock to trade around the $15 level at that time. I don't think it will get to single digits.

 

[OlafSicky]

The lows will come in December when investors start to sell their shares for tax loss selling purposes. I expect the stock to trade around the $15 level at that time. I don't think it will get to single digits.

My magic buy number is $15 so keep your fingers crossed

 

[Doppel]

Dipped under $28 today, I think it's back above that now.

Likely a long hard road back up to $38, assuming it ever gets there, that is.

 

[Destiny]

Mr. Logical, please explain the "revolutionary new product" to warrant LinkedIn's 600 P/E which allowed the stock to double in a year? That's right, you cannot, like the rest of us. The sooner you realize that the market trades off of emotion, the better off you will be. The first couple years of a stock's price is like the weather, to act like you know the forecast only sets you up for failure. I do agree with you in the long run, however, but we are talking short term profit.

LinkedIn did a very good job of monetizing their "Social Network." Plus it's target audience are professionals, companies, employers, and job seekers. It is also a market place to build brands, market your company, business groups, market yourself, etc. These type of people are not as fickle. LinkedIn is a network of Professionals. Facebook is simply a popular hang out that may or may not fade away depending on what they do next with their "social network" of assets.

LinkedIn is a little of each or combination of Monster.com, CareerBuilder, online resume, SalesForce, etc. (I know because executives in our company and myselft started getting solicitation calls after we created our LinkedIn profiles)...

Also I what I am saying is never 100% correct unless I am an insider (which is illegal) or have a crystal ball or a time machine. For all I know Facebook may do well and its stock prices rise or if they don't it falls... I am more of a Fundamental Analyst and a little bit of Technical Analyst. Also I'm more of a long term investor and not a day trader or speculator...

Also "Hype" and "Emotions" always drive the market... the stock's worth is what people are willing to pay for it - and there will always be conflicting analyst reports that will try to move price in both directions... also well informed investors will always to "profit" from these hype.

Heh with the negative hype behind the stock. I would expect it to drop into the PE range of Apple or Google. At 10 P\E wouldnt that put their stock about 5-7 bucks?

That is correct based on fundamental analysis.

Originally Posted by Rudee
The lows will come in December when investors start to sell their shares for tax loss selling purposes. I expect the stock to trade around the $15 level at that time. I don't think it will get to single digits.

That was like 30 years ago and they used to call that the "December Effect"... since then more and more institutional investors started doing it... as years pass they do it earlier and earlier to "avoid getting caught with unloading their stocks for dirt cheap prices." It eventually became the November Effect, October Effect, and now the "September Effect" is when investors start to sell their shares for tax loss selling purposes...

 

[randomrogue]

Dipped under $28 today, I think it's back above that now.

Likely a long hard road back up to $38, assuming it ever gets there, that is.

Has to rise 35% now. Anyone who bought FB was dumb. The P/E was way out of wack. At least to be a safe bet. It was a gamble with that initial price and not an investment.

 

[Destiny]

Like I said, the analysts are flocking to these doom-and-gloom predictions after the fact. The point that some of the negative predictions have some merit is besides the point. I'd take their opinions more seriously if they were so adamant about this before the IPO.

They were... just during that time very few people knew and didn't let the institutional investors know and others in the road shows know so it can get out to the public...

 

[busydude]

Dipping below $27 now. How low can this go?

 

[Destiny]

Dipping below $27 now. How low can this go?

If earnings guidelines/forcasts don't meet analysts' targets, stay flat and no double digit % growth in net income = under $10...

 

[DrPizza]

What's going on? It's up to $29.60 now. It must have gone up on analysts predictions that it was going to continue falling. Those analysts are having a hard time with this one.

 

[Nintendesert]

What's going on? It's up to $29.60 now. It must have gone up on analysts predictions that it was going to continue falling. Those analysts are having a hard time with this one.

It seems to be gaining flaccidity!

 

[Destiny]

Now the short sales are coming... hopefully this will lead to real price discovery... stock closed today at $25

http://blogs.barrons.com/techtraderdaily/2012/06/05/facebook-hits-new-low-at-26-23/

 

[Doppel]

Today it broke under $26. I don't care what this makes me, what you call me, and how evil it makes me look but I am absolutely freaking loving seeing this stupid stock fall into the toilet. I have no position on it. It just makes me feel great to be alive to watch this turd get flushed.