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Facebook trades under $30, down 7%+

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Re: Facebook trades under $30, down 7%+

#121

Post by Tloewald »

imcqueen wrote: post #59
cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

I would also think that it's easier to build a mobile app/social network that competes with Facebook than it is to build a mobile OS/device that competes with Android/iOS.

Hmmm. It's very easy to build a mobile platform to compete with Android -- fork it. This is Google's problem in China and with the Kindle Fire. This is probably why Google's "success" in mobile hasn't been reflected by huge stock market gains.

The success of Android forks has also impacted iOS to some hard to measure extent (were it not for Android and Android forks, Apple would, I think, be even more successful in the mobile spaces it plays in).

Re: Facebook trades under $30, down 7%+

#122

Post by bigdubs »

betadj wrote: post #102

An internet legendary destroyed by wallstreet.

This view is actually false. I should probably respond to a more visible comment but this will have to suffice.

The winners in the IPO, and this has been said before (not just by me), is facebook and zuckerberg. The losers are the underwriters and their clients who the underwriters placed the stock with (and now, the rest of the retail investment market).

Typically an IPO is priced such that 'insiders' are getting a better deal than the retail investors will have when supply starts to open up. This IPO, that methodology was reversed. It was a huge stock->cash dump, and will benefit $FB near term because they have some 20+bn in cash now, but probably ruin them long term because of the reputation hit they took, and the prevailing view that their stock is worthless.

TL;DR; facebook screwed wallstreet more than it got screwed by wallstreet.

Re: Facebook trades under $30, down 7%+

#123

Post by Tloewald »

ryanmerket wrote: post #50
bignoggins wrote: post #41

Earlier quoted context omitted.

It's 900 million monthly active users. Say what you will about FB but they don't use vanity metrics.

50% of which are daily active users.

If someone is working for a like-selling network and using 100 FB accts to earn their pittance, they'll constitute 100 active daily users.

Re: Facebook trades under $30, down 7%+

#124

Post by noblethrasher »

cletus wrote: post #73
cube13 wrote: post #64

Earlier quoted context omitted.

I disagree. While the market hasn't been acting too rationally in general over the last few years, FB dropping like a rock is actually a fairly rational response to their circumstances. FB made less money in Q1 2012 than in Q1 2011. That was reported by them before the IPO. FB blamed it on the fact that more users are accessing Facebook through their mobile clients, which don't get them as much advertising money. Nor…

On this point, Facebook were forced to go public. Normally a private company cannot have most than 500 stockholders. Facebook obviously has more than that number of employees. They previously applied for and got an exemption from the SEC on the basis that most stockholders were employees. That all changed early last year with Goldman Sachs' "investment vehicle" of holding stock on behalf of clients (a move the SEC wi…

>Normally a private company cannot have more than 500 stockholders.

I'm sure that you probably know this but just to be clear, the 500 shareholder limit is about whether or not a company has to report certain financial data to the SEC, not whether or not they must be publically traded.

Re: Facebook trades under $30, down 7%+

#125

Post by borism »

TomGullen wrote: post #22
unreal37 wrote: post #9

Can anyone explain why they are down 7%?

Supply and demand is the answer, although probably not the one you are looking for! The WSJ reported the options market has just opened for FB stocks. A lot of people seem to be very bearish about FB so a lot of short action could significantly impact the demand of FB stock. I'm an amateur at this though, and would love someone to correct me if I'm completely off here :)

Short selling doesn't lower demand for stock!

To short sell a stock you need to borrow it first. That actually creates additional demand!

Re: Facebook trades under $30, down 7%+

#126

Post by chromatic »

brown9-2 wrote: post #119
chromatic wrote: post #116

Earlier quoted context omitted.

Can anyone explain to me how the P/E ratio is a meaningful metric for a company's stock price and what it "should be" at when that company does not distribute earnings to the shareholders? There are two ways to gauge the value of a company. One way (the way to which you allude) is to buy it and hope that in the future, someone thinks it's worth more than what you paid for it. Some people call this the Greater Fool th…

So does this mean that if you use the Graham-Dodd-Buffet model of valuation, a company that pays a dividend to shareholders would get a higher valuation (all other factors being equal) than the hypothetical same company that does not pay dividends?

Yes and no. Free cash paid out in dividends is free cash not invested back in the company. Presumably free cash invested in the company could help the company grow to produce even more free cash in subsequent years.

If you measure only the average growth in free cash for the trailing ten years, you're ignoring whether the company pays out dividends. You only measure how much free cash it generates. Dividends are irrelevant to the free cash growth rate.

If you measure something like a return on invested capital, you measure how much actual cash the business reinvests in itself and how effective it is at free cash growth from that reinvestment. That metric does account for dividends, because money paid out in dividends or used to buy back stock is obviously no longer available for reinvestment.

edit With that said, some investors value regular and reliable dividends more highly than the fluctuations of the market's semi-random valuation of a stock at any point in time. If you're confident that Coca-Cola will always pay, for example, 4% of what you paid for a share in dividends every year, that stability might be worth something to you.

That's psychology and harder to measure and predict than numbers from financial reports filed with the SEC. You might get some interesting data if you calculate the time value of that money--is KO more valuable because you can get $0.13 per share quarterly in dividends starting now rather than holding onto it for up to ten years to make even more money? That's the kind of decision individual investors have to make for themselves.

I treat dividends as bonuses rather than expectations, but that's my own investment philosophy.

Re: Facebook trades under $30, down 7%+

#127

Post by greedo »

forgotusername wrote: post #78
cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

As ever a useful analysis, however what may I ask is it that you do at Google of relevance to armchair generalizing like this, that causes you to disclose your employment every time you post? It seems to me it detracts from the merit of otherwise consistently excellent write ups, and almost encourages suspicion of bias.

I feel it's always better to disclose any potential biases or conflicts of interest up front. Cletus could have appended it to the end of his comment, but many readers might TLDR and miss it.

Re: Facebook trades under $30, down 7%+

#128

Post by georgemcbay »

astrodust wrote: post #69
LargeWu wrote: post #15

Earlier quoted context omitted.

I think a better question is why are they only down 7%

As Facebook stands, they're doing okay. The stock might be over-valued, but that's the environment we're in now. To get that stock going up they'll have to increase their market share and the only way to do that is to start acquiring big social networks, something they don't seen prepared to do, or diversify.

"To get that stock going up they'll have to increase their market share and the only way to do that is to start acquiring big social network"

Which social network(s) are they supposed to acquire for growth? While there are certainly other social networks out there, I sincerely doubt there are any that don't have a huge user overlap with Facebook.

Re: Facebook trades under $30, down 7%+

#129

Post by base698 »

callmeed wrote: post #105
cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

I would add: 2(a). The Instagram team 700M of the 1B acquisition was stock. Assuming they didn't sell it yet, that's a good amount of money lost.

Those poor bastards! Now they can only afford the Gulfstream IV.

Re: Facebook trades under $30, down 7%+

#130

Post by InclinedPlane »

ryanmerket wrote: post #120
InclinedPlane wrote: post #54

Earlier quoted context omitted.

The problem is that mobile is just one of their problems. They need to increase their monetization by an order of magnitude per user. This will require them going from a niche advertiser to taking over a significant fraction of all worldwide ad revenue, this is no small feat. They also need to tackle mobile better and respond to all the other competitive threats that will come their way in the next decade. They have…

"This will require them going from a niche advertiser to taking over a significant fraction of all worldwide ad revenue, this is no small feat." But it is small for Facebook. They already have the footprint with over 9 million sites all running the Like button. Utilizing that same JS they can have a 'Social Adsense' revenue stream overnight. They can potentially grab the search queries from the headers and have impli…

And that may allow them to increase their ad revenue, perhaps even a lot. But is it enough to take control of fully 1/10th to 1/5th of all advertising spending for all media (print, television, radio, billboards, and online) for the entire world? Imagining that capturing that much of the market is a sure thing is just silly. Are they going to be able to get circa $20 billion in ad revenue a year from the Asian market? Within the next 10 years? How?
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