4 ms·

This is I don't get. How much money Facebook have made so far vs how much they have burned on operations and various acquisitions? Yes Facebook is earning mone

This is I don't get. How much money Facebook have made so far vs how much they have burned on operations and various acquisitions? Yes Facebook is earning money but will it be a great business to justify 300B+ valuation in long term?

user5994461 10y ago
They're probably fine as far as they keep having the detailed life and all information of billions of people.
edblarney 10y ago
FB has a P/E ratio of 42, which is high. The market assumption is that they can probably grow their /user revenues quite a lot because they're not getting that many new users. I suggest that FB is probably a very viable, very profitable company long term, but that their stock is probably over-valued. From an investors perspective, it may have nothing to do with the reality of underlying fundamentals - but how other investors will perceive them. Ergo - FB may still make a great investment if you think they will come out with some new shiny products to keep other investors hopped up on the juice. Purely by the books, they are about 4x overvalued right now. 10x price/earnings is the normal place for a healthy, strong, reasonably growing company.
- justapassenger 10y ago
  ~10 P/E is ratio for a well established, stable business - ones that maybe deliver 10% growth. FB revenue growth is still insane - https://www.wolframalpha.com/input/?i=facebook+revenue https://www.wolframalpha.com/input/?i=facebook+revenue - once that stops, honeymoon will be over. But FB is stabilizing - https://www.wolframalpha.com/input/?i=facebook+p%2Fe+ratio+compared+to+stock+price https://www.wolframalpha.com/input/?i=facebook+p%2Fe+ratio+c... - P/E is dropping even as stock is going up. Market is betting that in a couple of years revenue growth should stabilize.
  - edblarney 10y ago
    "FB revenue growth is still insane" Agreed, but in order to justify the massive P/E they would have to be growing quite a lot for the next 10 years. I don't seem them delivering this kind of growth over that time. Maybe. Google was able to do it for a long while.
    - justapassenger 10y ago
      Google has P/E ratio of 28. Facebook P/E ratio is right now only ~60% bigger, at 46 (and it already showed huge drop from >100 last year, as earnings are catching up with investors bets). G revenue is growing at the rate of ~20%, while FB is doing >50%. If stock price for FB growth continues, it'll reach Google P/E ratio pretty soon - not 10 years. More like a year.
- drieddust 10y ago
  Thanks I think your explanation makes more sense to me and I do think fundamentals are not right. I am not a finance guy so I don't understand a lot of thing but Facebook has issued 44.22B in common stocks and Zukerberg's personal worth is 50B plus. How does that work? In a way entire common stock is contributing to his wealth. I personally think a lot of investors will be the suckers in this game in the end.
  - chrisabrams 10y ago
    I would love to be the sucker who made millions (or billions) from Facebook.
    - drieddust 10y ago
      You will be the sucker if you couldn't dump yours stocks on somebody right before the nosedive :)
  - edblarney 10y ago
    The share structure is kind of a different thing. There are shares outstanding, generally they are 'worth' the same, but with some differences maybe due to voting which affects price a little ... Most of the companies stock are not 'floating' meaning, they are not out there on the market. So Zuck's shares are not. The 'share price' is usually just the price of the last transaction of buy/sell on the stock. If Zuck sold all his shares at once, he mighn't be able to get that price. But he wouldn't anyhow. There's nothing nefarious about 'others contributing to his wealth' - people are generally buying the floating shares given what they think it's worth. But here's a trick: if a company has a 'high profile' - often it's shares have some premium simply because there are more people looking at it. Supply and Demand.

user5994461 10y ago

They're probably fine as far as they keep having the detailed life and all information of billions of people.

edblarney 10y ago

FB has a P/E ratio of 42, which is high. The market assumption is that they can probably grow their /user revenues quite a lot because they're not getting that many new users. I suggest that FB is probably a very viable, very profitable company long term, but that their stock is probably over-valued. From an investors perspective, it may have nothing to do with the reality of underlying fundamentals - but how other investors will perceive them. Ergo - FB may still make a great investment if you think they will come out with some new shiny products to keep other investors hopped up on the juice. Purely by the books, they are about 4x overvalued right now. 10x price/earnings is the normal place for a healthy, strong, reasonably growing company.

justapassenger 10y ago
~10 P/E is ratio for a well established, stable business - ones that maybe deliver 10% growth. FB revenue growth is still insane - https://www.wolframalpha.com/input/?i=facebook+revenue https://www.wolframalpha.com/input/?i=facebook+revenue - once that stops, honeymoon will be over. But FB is stabilizing - https://www.wolframalpha.com/input/?i=facebook+p%2Fe+ratio+compared+to+stock+price https://www.wolframalpha.com/input/?i=facebook+p%2Fe+ratio+c... - P/E is dropping even as stock is going up. Market is betting that in a couple of years revenue growth should stabilize.
- edblarney 10y ago
  "FB revenue growth is still insane" Agreed, but in order to justify the massive P/E they would have to be growing quite a lot for the next 10 years. I don't seem them delivering this kind of growth over that time. Maybe. Google was able to do it for a long while.
  - justapassenger 10y ago
    Google has P/E ratio of 28. Facebook P/E ratio is right now only ~60% bigger, at 46 (and it already showed huge drop from >100 last year, as earnings are catching up with investors bets). G revenue is growing at the rate of ~20%, while FB is doing >50%. If stock price for FB growth continues, it'll reach Google P/E ratio pretty soon - not 10 years. More like a year.
drieddust 10y ago
Thanks I think your explanation makes more sense to me and I do think fundamentals are not right. I am not a finance guy so I don't understand a lot of thing but Facebook has issued 44.22B in common stocks and Zukerberg's personal worth is 50B plus. How does that work? In a way entire common stock is contributing to his wealth. I personally think a lot of investors will be the suckers in this game in the end.
- chrisabrams 10y ago
  I would love to be the sucker who made millions (or billions) from Facebook.
  - drieddust 10y ago
    You will be the sucker if you couldn't dump yours stocks on somebody right before the nosedive :)
- edblarney 10y ago
  The share structure is kind of a different thing. There are shares outstanding, generally they are 'worth' the same, but with some differences maybe due to voting which affects price a little ... Most of the companies stock are not 'floating' meaning, they are not out there on the market. So Zuck's shares are not. The 'share price' is usually just the price of the last transaction of buy/sell on the stock. If Zuck sold all his shares at once, he mighn't be able to get that price. But he wouldn't anyhow. There's nothing nefarious about 'others contributing to his wealth' - people are generally buying the floating shares given what they think it's worth. But here's a trick: if a company has a 'high profile' - often it's shares have some premium simply because there are more people looking at it. Supply and Demand.