"And then if it doubles again it becomes 25, and then it becomes 12, and then it becomes 6. only 4 years away to Facebook being a blue chip stock - so all that the 100 PE ratio is telling you is that they do believe that revenue and income will grow pretty quickly over the next few years."Those are some BIG ifs. I'm going to contrast Google and Facebook to explain why I think Facebook is overvalued.
When Google was in it's fast growth phase, it could perhaps justify a P/E like what Facebook has now - because of the way in which Google makes money. For roughly 1 out of every 14 Google searches, a user clicks a Google ad. As the amount of people on the internet grows, that means the amount of searches grow, meaning the number of ad clicks grows in tandem. Even today, with all the smartphones and tablets and people from the BRICS coming online, Google only has a P/E of 21[1].
Now contrast that with the way in which Facebook makes money. Targeted ads. The revenue they generate doesn't grow in tandem with Facebook's userbase. Granted, the revenue goes up as companies chase the eyeballs, but it seems to be a mixed bag of results selling ads on Facebook, so some companies aren't going to get the results they want and will quit Facebook. People there don't go there primarily to look at products (completely different to many Google searches). And of course some companies will get great results, but the overall point is that there isn't a direct correlation between user growth and revenue growth.
Ah!, you say, but there are other ways for Facebook to make money (off the top of my head):
a) Premium celebrity pages (pay Facebook for a prominent page to get fans)
b) Somehow charge for user accounts, maybe for premium features
c) Selling user data to third parties
d) Zynga etc. profit sharing
e) Others
Maybe they could make some revenue from premium celebrity pages, but not enough to justify a 3-figure P/E, IMO. Charging for premium features would be highly controversial, if they did this it would be a sign of desperation and a complete departure from where they began. They probably will do some form of c at some stage (don't worry, your data is completely anonymised!) but users would probably abandon ship to competitors in droves if they did. They will continue to make money from social gaming, but it's fickle and short-lived, plus Zynga is trying to wean themselves off Facebook to grow their own revenue.
Overall I think they will continue to make billions from ad impressions and social gaming profit sharing, but nowhere near enough to justify a $100bn valuation IMHO. If they bow to Wall Street pressure and really try to squeeze their userbase data for every dime (you could call this 'doing a MySpace', i.e. shooting themselves in the foot), people will leave in droves to the next social hotspot. So it will be 'interesting' to see how they will justify the lofty valuation over the coming years.
[1] http://www.google.com/finance?q=NASDAQ%3AGOOG