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* Posts by OknotOk

2 posts • joined 18 May 2012

Facebook's ONLY failure: Expectations management

OknotOk

Facebook fail

Facebook weren't forced to the markets and the management weren't forced into the valuation.

The valuation was obviously too high and anyone sensible was shorting the stock like crazy, knowing that it was all coming crashing down.

Does anyone know anybody that has clicked on a Facebook ad, let alone bought anything off the back of it? Every single piece of evidence or investigation into the long term effectiveness of FB advertising must have made harrowing reading for management.

Apple trading at c. 13, Google at c. 19. It doesn't take a genius to work out that even with expected growth (and Facebook is likely to deliver growth, especially as it branches out into the Indian market) it was way over the top.

And it has been damaging for Facebook so management should have done more.

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$US38 share price values Facebook at US$104b

OknotOk

Valuation

On a PE ratio this values Facebook at 107x earnings. Which for a company that has admitted it has serious difficulty turning users into revenue is simply insane.

For a comparison, Apple trades about 13x and Google about 19x. How anyone can think Facebook is worth it is beyond me.

Yet the shares will probably end the day at least 50% higher due to demand of the stupid. One WSJ poll had them expected to end at > $200. Where they'll be trading in 12 months time is anyone's guess.

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