I haven’t talked about Facebook (FB) stock in a while (basically since the last big follow-up news article on its hilariously bad IPO a year ago) and I just wanted to revisit the stock.
The news is generally not good. Unless you managed to buy FB at its low point in late-summer and early-fall, you’ve basically lost money (if you’ve managed to get in at its low in late August you’re making a tidy 50% profit). While the rest of the broader market has been rallying the last seven months Facebook has remained largely flat.
If you take a look at its fundamentals the news isn’t much better. Right now the stock’s P/E ratio stands at 2,209 which is hugely overpriced (my rule of thumb is that a P/E in the 15-20 range is “about right;” Microsoft (MSFT) has a P/E of 17.97, Apple (AAPL) has a P/E of 10.34, and Google (GOOG) has a P/E of 27.07. Facebook’s P/E is more reminiscent of the late 90s tech boom days). Considering that FB barely managed to eke out a profit in 2012 that suggests significant problems with the company’s future health.
This is somewhat mitigated by a 36% increase in year over year revenue in Q1 2013. However, with some news organizations reporting a sharp decline in users and the release of a phone (or perhaps an android home screen?) no one cared about it — and which AT&T may be cutting soon only a month or two after its introduction — I think it would not be a stretch to call Facebook’s future prospects as “troubling.”