Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Facebook shares hit again as valuation doubts rise

reuters.com

Post reply on HN
Print view View original

51–60 of 60 posts

Re: Facebook shares hit again as valuation doubts rise

#51

Post by tomkarlo »

snorkel wrote: post #29

Stock prices rise and fall based on the popularity of the brand. Sure earnings and other announcements nudge a stock up or down for a week or two, but it's really the reputation of the brand that keeps the price up. In this regard FB's biggest risk is people will get bored of FB. This is a risk Google hasn't had to face yet, as everyone still relies on Google for search, but FB is mostly for entertainment, and people…

Ultimately, it's profits that drive the value of a stock, not the brand. Yes, Apple is a popular brand. But you can't really say the same for Chevron, Exxon or Merck, all of which are top 20 stocks.

Re: Facebook shares hit again as valuation doubts rise

#52

Post by anigbrowl »

IsaacL wrote: post #32
lionheart wrote: post #10

I'm not really sure why everybody here is so bearish on FB. Sure, its an unproven company with a high P/E ratio, but so are most tech startups when they go IPO. I think Zuckerberg has shown that he knows how to innovate, grow the company, and even make painful changes that eventually lead to more growth and profit. There is at least a decent chance that FB will refine their business model and turn into a large, stabl…

I'm cautiously bullish too. Been planning to write a blog post about this, but I'm in the middle of finals right now. Anyway, summarised: - They still have lots of growth potential in Asia, and other places as more and more of the planet comes online. - Zuckerberg is a Gates-style evil genius. Being grey hat is bad for PR, but good for figuring out monetisation. (cf Twitter, loved by the Valley and make no money). He…

I'm neutral on FB's 'correct' value but think some of your comparisons are misplaced. It has beaten out other social networking offerings, but then AOL beat out Prodigy, Compuserve and various other competitors back in the 90s. I'm not as sure as you about the stickiness; I'm less social than the average person, but I only log into FBonce a month, at most.

- There's also "black swan" revenue streams. A few years ago, who would have predicted virtual vegetables would have accounted for over 10% of FB's revenues? There might be more unknown opportunities like that in the future.

That's a major weakness to me. Virtual goods are, by definition, Veblen goods, and thus the demand for them is highly elastic. Even if all your virtual eggs hatch into virtual chickens, you can't eat them; so there's no assurance that demand for virtual chickens will continue. You might find it illuminating to study the ups and downs of the Second Life land market.

BTW, Sebastian Marshall is 'lionhearted' on HN, no 'lionheart'.

Re: Facebook shares hit again as valuation doubts rise

#53

Post by IsaacL »

tomkarlo wrote: post #49
IsaacL wrote: post #32

Earlier quoted context omitted.

I'm cautiously bullish too. Been planning to write a blog post about this, but I'm in the middle of finals right now. Anyway, summarised: - They still have lots of growth potential in Asia, and other places as more and more of the planet comes online. - Zuckerberg is a Gates-style evil genius. Being grey hat is bad for PR, but good for figuring out monetisation. (cf Twitter, loved by the Valley and make no money). He…

"Might be worth $200-$300 bn eventually" doesn't justify "worth $100 bn now" unless you believe that either: 1. That outcome is highly probable 2. That outcome will occur very quickly (within 2-3 years.) Let's say we believe the low end of that ($200bn, or 100% growth.) If we believe that will happen in 3 years, that's about 25% growth in market value annually (and a much larger rate of growth in revenues / profits t…

Thanks for the reply -- the valuation method I mentioned was obviously too crude, so I was hoping someone would call me out on it. I don't know much about finance but I'm actively trying to teach myself. Anyway, it would be good to find a more reliable way to quantify a company's long-term, potentially risky growth opportunities.

This calculator: http://www.ft.com/cms/s/2/8a21debe-944e-11e1-bb47-00144feab4... was kinda useful, but a more detailed model would be interesting.

Re: Facebook shares hit again as valuation doubts rise

#54

Post by tomkarlo »

IsaacL wrote: post #53
tomkarlo wrote: post #49

Earlier quoted context omitted.

"Might be worth $200-$300 bn eventually" doesn't justify "worth $100 bn now" unless you believe that either: 1. That outcome is highly probable 2. That outcome will occur very quickly (within 2-3 years.) Let's say we believe the low end of that ($200bn, or 100% growth.) If we believe that will happen in 3 years, that's about 25% growth in market value annually (and a much larger rate of growth in revenues / profits t…

Thanks for the reply -- the valuation method I mentioned was obviously too crude, so I was hoping someone would call me out on it. I don't know much about finance but I'm actively trying to teach myself. Anyway, it would be good to find a more reliable way to quantify a company's long-term, potentially risky growth opportunities. This calculator: http://www.ft.com/cms/s/2/8a21debe-944e-11e1-bb47-00144feab4... was kin…

There's a million models, but there isn't going to be one that's universally correct. The problem is that the inputs are generally too subjective and too noisy in any model that includes future earnings (there are some conservative ones that are based only only on past performance, but they will never match with an IPO valuation.)

A great place to start is this book: Value Investing: From Graham to Buffett and Beyond ... by Bruce C. N. Greenwald ... most folks will say it's too conservative but it's a starting place.

Re: Facebook shares hit again as valuation doubts rise

#55

Post by stch »

j_baker wrote: post #37
bri3d wrote: post #31

Earlier quoted context omitted.

Your approach to estimating Facebook growth by languages supported is interesting but I suspect fundamentally flawed. There's an incredible long tail when it comes to languages spoken, especially when multilingual individuals who speak both an obscure regional language and a more common one are taken into account. http://en.wikipedia.org/wiki/List_of_languages_by_number_of_... gives a great overview of this long tail…

Two things: 1. I wasn't trying to estimate Facebook's growth. I was merely trying to refute the notion that Facebook is running out of people to use their service. My method is arguably quick and dirty, but it makes for a good heuristic, doesn't it? It's enough to tell me that it's probably not worth my time to try and dig up better data. 2. Fine. The number I gave of 6910 probably was too high, but 70 is still less…

The thing is, your method is NOT a good heuristic.

Re: Facebook shares hit again as valuation doubts rise

#56

Post by vikas5678 »

I think the negative comments which came out recently regarding possible threats to earnings from the mobile platform, GM pulling their ads from Facebook and the increase in the offering size all contributed towards this downfall. I think when Facebook comes out with their earnings next quarter, people will have a better idea where the company is headed and the shares might get a higher bid.

Re: Facebook shares hit again as valuation doubts rise

#57

Post by krschultz »

j_baker wrote: post #28
krschultz wrote: post #22

Earlier quoted context omitted.

I think the big stumbling block is that Facebook's growth is getting population limited. That is remarkable to even think about, but they're running out people left on Earth that don't have a Facebook account. So your opinion on Facebook's (financial) value really comes down to how much money you think they can make per user. Their current system seems to be 'show the user ads based on the users hobbies, interests, l…

Facebook works in "over 70" languages: https://developers.facebook.com/docs/internationalization/ One estimate says there are 6,910 languages in the world: http://www.science20.com/science_20/blog/rarity_koro_brand_n... In other words, you're simply wrong that Facebook is running out of people who don't have a Facebook account. I might buy that Facebook is running out of people that don't speak the languages it suppo…

I don't think that really has anything to with it at all.

It comes down to how many people in the world are connected to the internet. I've seen a lot of numbers around 2 billion people. Facebook has 900 million users.

Even if they got every person on earth, thats only 7x growth (and that would be impossible).

Their valuation is not based on 2x or 6x growth, their valuation requires an order of magnitude of revenue growth. There are not an order of magnitude more users left on this planet. And that completely ignores the fact that most of the remaining people aren't as valuable to advertisers.

Re: Facebook shares hit again as valuation doubts rise

#58

Post by freehunter »

j_baker wrote: post #40
freehunter wrote: post #35

Earlier quoted context omitted.

How many people on Earth are there who don't speak one of the 70 languages, though? Imagine if they didn't support German. How many Germans speak English, or French, or even Russian? A lot. So while they might not support Tagalog, how many Tagalog speakers don't also know how to speak Filipino? Going on basis of language support is ridiculous at best without weighting how many exclusive speakers there are in that lan…

Of course it's a flawed approach. I was responding to a comment on HN, not writing a paper in an academic journal. Yes, if I really wanted get proper data, I would do the things you mention. But please give me some credit. The comment I responded to offered no data points whatsoever. If I offered one piece of data that showed someone something , isn't that a net positive?

For that point, yes I will give you credit. At least facts give you something real to argue for or against.

Re: Facebook shares hit again as valuation doubts rise

#59

Post by stonemetal »

stonemetal wrote: post #21
gfosco wrote: post #7

Earlier quoted context omitted.

Sadly, you're going to lose a lot of money. Facebook cannot possibly bring in the required revenue for growth. Their base will erode far faster than new business will come on board. The IPO was the bubble bursting, making the insiders rich, and laying the ruin for everyone who jumped in.

But they "only" sold 18 billion, that leaves insiders still holding 92 billion of FB. If this were really a bubble bursting wouldn't the rich insiders be holding a much smaller chunk of the fool's gold.

Never mind I appear to be mistaken, the company only sold 18 billion dollars in stock, the insiders sold off 57%. http://news.ycombinator.com/item?id=4023751

Re: Facebook shares hit again as valuation doubts rise

#60

Post by IsaacL »

tomkarlo wrote: post #54
IsaacL wrote: post #53

Earlier quoted context omitted.

Thanks for the reply -- the valuation method I mentioned was obviously too crude, so I was hoping someone would call me out on it. I don't know much about finance but I'm actively trying to teach myself. Anyway, it would be good to find a more reliable way to quantify a company's long-term, potentially risky growth opportunities. This calculator: http://www.ft.com/cms/s/2/8a21debe-944e-11e1-bb47-00144feab4... was kin…

There's a million models, but there isn't going to be one that's universally correct. The problem is that the inputs are generally too subjective and too noisy in any model that includes future earnings (there are some conservative ones that are based only only on past performance, but they will never match with an IPO valuation.) A great place to start is this book: Value Investing: From Graham to Buffett and Beyond…

Thanks, added to the reading list.
Post reply on HN