Thursday, September 23, 2010

Calling Mr. Barnum

News item: "Facebook now 'worth $33 billion'."

Counterpoint:  Facebook is not worth $33,000,000,000.  Excerpts:
If you boil it down to what valuations really should be about, discounted future cash flow, it gets completely bizarro-world funny. The rumor is that Facebook will be generating a billion dollars in revenue. That’s certainly real money, right?

Wrong. Real money is what’s left over after you pay your expenses. If the supposed billion dollars Facebook is allegedly pulling in this year was happening at anywhere a decent margin, they wouldn’t have needed a series E round of $120 million from Elevation Partners just three months ago.

But let’s be charitable. Let’s imagine that Facebook miraculously made $200 million this year — a 20% margin. (I don’t think that’s true, otherwise why take another $120 million from Elevation Partners, but hey, let your imagination roam). That would put Facebook’s P/E at some 165.

That’s about 7.5 times as much as Google, the golden cash cow of the internet world. Would you seriously think that Facebook is 7.5 times as good or as promising a business as Google? Get outta here.
Read the whole thing.  What was that about suckers being born every minute?  It's no secret that I have a low opinion of Facebook but my opinion of those who would squander their money on Facebook STOCK is lower still.

Like everyone else in the known universe I DO have regrets about missing out on a couple of IPOs, though.  If I'd have rolled the complete contents of my IRA into MSFT back in the day, or even what was left of it when GOOG went public, I'd be smoking a Cuban cigar while writing this from my condo in Miami Beach... instead of writing from a trailer park in New Mexico.  Coulda-shoulda-woulda, and all that.  I won't be putting any money into Facebook, however.

10 comments:

  1. Facebook . . . stock?!?! Who woulda thunk it.

    It's been down all afternoon, too.

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  2. On a related subject, Facebook is currently offline...cause unknown.

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  3. Facebook . . . stock?!?! Who woulda thunk it.

    Not yet, but soon... as rumor has it. The FB folks think the IPO market is weak right now, and they're prolly right.

    BR: FB is down? Heh. Ya wanna ask me if I care? Nah... you don't.

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  4. I missed Microsoft. My brother-in-law didn't. He urged me to get in, but the whole idea was foreign to my thinking. He made a pile of bucks, but cashed out too quick, and blew it all.

    I often wonder if I would have, too. Never know. Facebook is a phenomenon for sure. But, I wouldn't invest in it. Po' folks like me invest all our extra money down to the grocery sto.

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  5. Well, hell Buck, I have to admit begrudgingly, that I'm a FB user but I certainly wouldn't buy stock in it. So I hope that at least keeps me in your good graces!

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  6. I enjoy FB. It allows me to keep up with what is going on in the lives of people I care about but because life is so complicated - never get to see.

    It can be a time-hole though...must use restraint!

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  7. I saw a news blerb on FB being down. People who stay on the computer all day had to go to YouTube and such for their entertainment - poor thangs!

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  8. He made a pile of bucks, but cashed out too quick, and blew it all.

    I might have done the same thing. But then again, since we're talkin' IRA, prolly not.

    Dale: I don't begrudge other people who have FB addictions... it's just not me. ;-)

    Kris: See above.

    Lou: I wonder if YouTube's traffic spiked for those two hours yesterday?

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  9. Hm. 100 shares, perhaps, just for fun? I can remember when Amazon was getting semiannual cash infusions, and the quarterlies were about how many millions they had lost. It was kind of a long-running joke.

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  10. You're more of a high-roller than me, Gordon. Almost $8K, just for fun? I think not! Ten shares, mebbe... ;-)

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Just be polite... that's all I ask.