Home » Behavioural Investing » Facebook will stab investors. $FB $TWTR $LNKD

Facebook will stab investors. $FB $TWTR $LNKD

Facebook (Nasdaq:FB) announces in precious few hours. Can you sense the anticipation. Great if you’re in financial media and need to create buzz. The story line is we expect some improvement in earnings per share. which is good because that’s what is needed. Improvement.

Share prices are the present value of future earnings. FB is trading at 209 times trailing earnings. Lets repeat that; 209 times. What other investment experience with a publicly traded mega cap stock has a 209 times PE ratio created more wealth.

But we are paying for future earnings. What the PE ratio is saying FB is worth 10 times the S&P valuation.

Personally if I was applying a for a Wall Street Job I would not let that one trip off my tongue. If I was a hedge fund manager or some kind of other type of money manager I would not suggest to potential investors that this is a good strategy. Who has a risk profile where 209 PE ratios are acceptable.

According to the Wall Street Journal there are no underweight or sell recommendations. Only ten say hold. 33 urge you to buy and or overweight. The stock has had a big run up in the past few months. So what is left. there are no new cheerleaders to drive in money.

In the past twelve months insiders have sold more shares than they have bought by a factor of 4:1. not bullish.

The legacy investors are all looking for a way out and will probably want to sell the moment they think the escape door is big enough.

So lay it on me with the conference call. Talk to me about on-line advertising and metrics. Yadda Yadda Yadda. But 209 trailing PE does not work. So what’s it gonna take to double and I mean really double net income and just a 100 trailing PE. Still insane.

This one will be the stalking horse that makes other companies like Twitter (NYSE:TWTR) look good.

George Gutowski writes from a caveat emptor perspective.

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One thought on “Facebook will stab investors. $FB $TWTR $LNKD

  1. Pingback: Obamacare Insults Social Media. Facebook and Twitter Can Solve This $FB, $TWTR #SEO #Obamacare | FinancialSkeptic's Blog

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