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 Facebook Stumbles On IPO... Is It A Buy? by Robert Morris, Editor The Facebook (FB) IPO was hailed as one of the greatest investment opportunities in stock market history. But in the end, it can be summed up with just one word... ANTI-CLIMACTIC! There's really no other way to describe it. -------------Sponsor------------- Currencies are risky and you need a lot of money to invest in them, right? WRONG! Our own in-house currency expert, Karl Stevenson, can show you the secrets to making insane amounts of money from the movement of the world's currencies. And forget about unlimited risk, spending all day in front of a computer, and having tons of money to start with... Karl can show you how to easily and safely take $2,000 and turn it into $75,410 or more... over and over again! Click here to find out how... ------------------------------------ Investors had been anticipating for months that Facebook would soar on the IPO. With nearly one billion users worldwide, Facebook is the 900 pound gorilla in the hugely popular social media business. And most experts are projecting strong growth ahead for the company. Nevertheless, the heavily hyped IPO fell flat on its, well... face. The social media giant ended its first day of trading just 23 cents above the IPO price. That translates to an opening day profit of less than 1%! Clearly, not the huge first day gain most investors were expecting. What's more, the stock's plunging further in early morning trade. As I write, FB is down more than 12% at just over $33 per share. And it's trading at a 13% discount to the IPO price. Now, I must admit I'm not all that surprised by Facebook's cool market reception. You may recall I was one of the few market analysts who predicted Facebook's IPO would fail to live up to the hype. And in my article, Three Reasons Why I'm Not Buying The Facebook IPO, I urged my readers to avoid buying FB on the IPO. However, with the share price dropping, many investors are starting to wonder if FB is now a good buy. The short answer... Not yet! Even at $33 per share, Facebook is still way overvalued in my humble opinion. At that price, the stock is trading at a lofty 79x trailing twelve months' earnings. Just how high is this multiple? Try this on for size. FB's PE ratio is more than 4x greater than Google's (GOOG). And it's over 6x larger than Apple's (AAPL). We haven't seen a valuation this high in the stratosphere since the dot com bubble of the late 1990s. And given the company's recent struggles, it's hard to justify why FB deserves a higher PE than GOOG or AAPL. Just last month, Facebook reported a weaker than expected first quarter. Both revenue and earnings declined from the fourth quarter of 2012. And to make matters worse, the drop was due to a downturn in the company's core business... internet advertising. This is a big concern going forward. In addition, the company now faces a potentially huge legal battle over the privacy rights of its users. Shortly after the IPO, the company was sued by a group of current Facebook users. The suit claims Facebook invaded users' privacy by tracking their internet usage. Plaintiffs are seeking money damages to the tune of $15 billion. This lawsuit is certain to be a major distraction for a management team just now making the difficult transition from private to public company. And if Facebook loses the suit, they may have to pay a fortune in money damages. In fact, Facebook could end up paying out nearly every penny raised in the IPO. Bottom line... Even with the recent drop in price, Facebook shares are still highly overvalued. Investors would be well served to let these shares fall to a more reasonable level before hitting the buy button. Profitably Yours, Robert Morris | Monday, May 21, 2012  • Verizon Communications (VZ) hit a new 52-week high of $41.96. The telecom carrier's market cap is now just under $118 billion. • Hewlett-Packard (HPQ) set a new 52-week low of $21.28. The computer maker's market cap has now fallen to nearly $42 billion. • Green Mountain Coffee Roasters (GMCR) fell to a new 52-week low of $24.01. The coffee producer's market cap is now just under $4 billion.  "Failure is success if we learn from it." -Malcolm Forbes   
 Is Another Summer Market Crash Coming? Friday, May 18, 2012 Triple Your Money On JP Morgan's (JPM) Downfall Wednesday, May 16, 2012 Ignore The Naysayers... Buy Chinese Stocks! Monday, May 14, 2012    |
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