>The best explanation I can come up with is that FB benefits from its massive base of engaged users. I imagine there are a great many individual investors who a

>The best explanation I can come up with is that FB benefits from its massive base of engaged users. I imagine there are a great many individual investors who are torn between wanting to participate in "internet tech" and wanting to not invest in what they don't understand. FB comes along and I imagine many of them to reason "I use it all the time, therefore I understand it". I believe Microsoft has also benefited from this effect. Microsoft also sold products, and had a very strong revenue stream from that. Hype helped MS grow, but their core business fundamentals have traditionally been pretty strong. Facebook seems overvalued by at least 300%, maybe more. A quick look at tech companies that have about $100 billion market cap(like Facebook), and the closest comparison I can come to is Oracle. Unfortunately, the comparison doesn't look good for Facebook. Oracle's revenue for 2011 was around $35 billion, which is 10 times Facebook's. Net income was around $8.5 billion(from here: http://www.oracle.com/us/corporate/investor-relations/financials/q4fy11-421266.pdf http://www.oracle.com/us/corporate/investor-relations/financ... ). Facebook, according to their SEC filings, had a net income of $1 billion in 2011. I think that Facebook's valuation is driven entirely by hype, which really means that the stock should perform quite well for the next 30-60 days, until Q2 earnings are released. At that point, I have a feeling that it will drop when investors realize that FB isn't pulling in nearly as much money as their stock is indicating.