Why Facebook Stock isn’t a great buy?

Henry Blodget, of Business Insider, has a great post of why facebook stock isn’t a great buy.  Here is the link to full post:

Facebook’s private-market investors who captured all of the high-multiple “momentum” upside…while public-market investors climbed aboard just in time to ride out the Great Multiple Compression.

 The key take away:

  • Facebook is great company and earnings will increase
  • But growth will slow down (and we are already seeing this), the price investors are willing to pay (P/E ratio) will contract as well (trailing 12 month earnings)
    • Google P/E Ratio: 17x
    • Apple P/E Ratio: 14x
    • Microsoft P/E Ratio: 10x
    • Facebook P/E Ratio (@$28 a share) 70x
  • Eventually, the ratio will be inline with these other companies

 

 

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