Why do you think the FB stock is likely to appreciate significantly in a few months? If you really believe this, I assume you've just invested a significant chunk of your net worth into FB stocks?
Well.....FB is the poster-child of tech exuberance right now. Everybody uses Facebook. Many of those users will likely want to buy the stock - not for any sophisticated investment thesis. But because they want to own what they use.
That will likely push up demand for the stock in the short-term, thereby the price.
Aside from that, we have never seen a service have 800M users and still growing at the rate that FB is growing and have the stickiness that it has. So there is no telling how big it can get - which is why the valuation is so high.
There is no doubt that over the long term, FB will figure out a way to print money. It's just a matter of time.
Sorry if I came off crass, my point is that people throw 'stock tips' like this around without care and it's generally bad advice and you have to understand some people reading it may act on it.
Someone could read what you wrote and buy stock when your actual reasoning is simply because you think the public are going to get excited and buy the Facebook stock because they use it, along with the big assumptions that a) this wont already be reflected in the price and that b) these people who are buying the stock will have a meaningful impact on a $100b cap company with a 'significant' increase in price.
These are not the best assumptions and reasons to state that it's highly likely that FB stock will significantly increase. Every time I hear someone say something like this I have to ask how much of their own wealth they've stuck out on the line because more often than not it's nothing.
I wasn't giving a stock tip. Just stating what I see as the most obvious conclusion.
That being said, if I had a net worth of any significant value that wasn't illiquid, I would probably buy FB stock on IPO and hold it for a few years. I can't see why you wouldn't want to.
They have not really monetized, they have 800M+ users and they are already doing $1B/profit per year. Imagine when they really figure out how to make money.
One good reason not to is that a 100/1 PE ratio is very high if your assuming $1b profit and a $100b cap. In comparison Google has a P/E of 20, and Microsoft 11.
Those reasons you have given are basically a gamble on the assumptions that:
- Facebook can earn a lot more money (5x - 20x more)
- Facebook hasn't done it yet because they haven't figured it out
- They will figure it out within 3 years (your exit window)
It does seem like an overly simplified argument. I don't think monetising Facebook to the levels you think possible in a 3 year window is as easy as people think, and it might not actually be possible.
You're also ignoring the possibility that this gamble isn't already priced into the stock.
Yes, but is any of that not already priced into the stock? The folks who have been buying and selling huge chunks of FB stock for the last few years have done a lot of thinking about that sort of thing.
I understand when a startup, like Instagram acquiring eyeballs and saying: "we really don't have a business model, but when somebody will acquire us - they surely will figure this out".
But when Facebook saying "we didn't really started to monetize our 800M eyeballs, we just waiting for IPO and will figure it's later" - it's sounds silly.
They never said that. It's just their actions. They generate enough cash to sustain themselves and they can grow. They are doing it properly and taking their time.
Just like Twitter is.
You may poo poo it all day, doesn't change the fact that over the long run it works.
