I think it's a fine metric for two similar companies. But Facebook and Google simply aren't similar, beyond the fact that they are both internet companies and both funded by advertising. I agree - and that's sort of my point. I would argue that they are more similar companies than Facebook and Google and are more direct competitors and more in the same industry. I think the bigger problem in the analysis is that it uses very vague/general assumptions and then comes up with specific valuations based on that. The guy was on CNBC this morning, and even he admitted that a valid criticism is that the model may suffer from garbage-in, garbage-out problems. I'm pretty certain than in 2017, Facebook will not have a P/E ratio of whatever Google has today, or a P/S ratio of 5.51. I have no idea if it will be higher or lower, but I'd be willing to bet it won't be that - because there's simply no reason for it to be the same as Google's, any more than Amazon and Walmart should have similar numbers. My problem is not with him saying that FB is overvalued - I've said numerous times that it's priced to perfection and that I think there are all sorts of problems in Facebook achieving the projected growth. My problem is with him using all the vagueness to come up with $13.80 as a price and presenting it as something more than a total shot in the dark. I think that number is totally random and designed simply to grab headlines.
The difference in how they operate their business is night and day, principally in the online/offline distinction but in various other ways. Whole Foods and Best Buy are both big retailers, but not comparable. I think there's been a lot of academic research done on how to choose comparable companies for valuation purposes.
How many of you actually use FB for hours a day? FB has become modern email that I check a few times a week -- it's become very boring like every other shiny new thing on the internet.
Basically, an investment in Facebook is an investment in the idea that Mark Zuckerburg is the next Steve Jobs and will basically create/transform his industry. There's no valuation model that's going to work for that because there just aren't any comps or even estimates you can use with any reasonable level of accuracy. You can guess that they are over or undervalued or guess whether Facebook can or can't revolutionize the industry, but that's really about it, in my opinion. Trying to attach a number to it is something analysts will do because they have to, but they don't have much merit to them at all.
Can you elaborate on this? I'm in no way saying they are perfect competitors, but even with Macy's vs. JC Penny you're never perfect. These are less perfect, but seem to be very similar in business model, ultimately. Your statement to me reads as "they aren't very similar, beyond the fact that both are multi-billion tech companies focused on the consumer internet as means to drive ad revenue, which provides the majority of their value".... i.e. they are very similar. I'm having a hard time thinking of a better useful comp? You could argue it, but you'd be wrong. Fair, and probably true. Alternatively, if his project was to use a certain methodology to come up with a stock price, then that's what he did, pointing out the methodology's flaws.
I use it a lot. I usually have like 50 tabs open, at least one of which is Clutchfans and one is Facebook.
There are a ton of internet companies/sites that make their money from advertising: ESPN.com, HuffPo, Google, Facebook, Yahoo, etc. It's an incredibly broad category, and none of those should be valued the same based on the fact that they are big and sell ads. Macy's and JC Penney do basically the same thing with different names. If you took the Macy's logo off a store and put a JC Penney logo on it, many people wouldn't notice a difference. That's just not the case with Google and Facebook. The growth potential is different, the monetization is different, the reason for usage is different, the level of interest in ads on each is totally different, the way they target ads is different, etc. Beyond that, Google has all sorts of random stuff that they are involved in from phones to browsers to maps to car batteries to payment systems, while Facebook is one central destination website. Their expense structures and employment rates are different, on and on and on. I don't think there is a better comp - because I don't think there are any companies like Facebook. I don't think even Facebook has any clue what their company will look like in 5 years at this point. But I don't think a bad comp is better than no comp. In fact, it's worse, because it creates a sense of concreteness where there really isn't any. At least if you say there's no comp, people can understand that your numbers are very sketchy. When you try to compare FB to a company that it has no business being compared you, you end up with really bad numbers that people look at as though they have merit.
lol, ive never played Farmville. I don't usually go to Facebook on my browser anymore, ever since the mobile app.
I don't play any games at all on Facebook. Actually, I block all these apps, and ignore people who spam me with such requests.
Zero, point, zero. I was on there for a little over a year, found who I needed to, would meet people at events and they would know like everything that was going on and I had no idea they were even reading my page. That creeped me out a bit, plus it just got boring as ****. Everyone only posts happy things and check ins. Lame. I don't miss it one bit and will never go back. Just thinking about logging on and that lame ass timeline makes me wanna hurl.
Why? Same here. I never play games on FB and actively block any such apps from accessing my profile in any way. The only "apps" I allow to access my profile are Android mobile apps like Friendcaster and the Picasa FB plugin. I block all social plugins, readers, video apps and the such - news sites, Socialcam, even Instagram.
The IPO has been a fiasco. A monumental cockup. Had they opened at a much lower price, which was intially the idea, everyone today would be smiling and patting each other on the back. Instead, the huge drop in the stock's value has people questioning not only the IPO and how it was handled, but the company itself, its business model, its future prospects. Everything.
