

Ask HN: Should I buy Facebook stock while the price is low? - josscrowcroft

I always hear anecdotal stories of people whose uncles bought them a chunk of Apple stock when it was in the double-figure value (and are now loaded, or at least fully-funded through college or starting a business, etc.)<p>With this in mind - should I buy a small-ish amount of FB stock, as a long-term investment, given how low the price is falling?
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solipsist
As most of the HN crowd is skeptical of Facebook's future stock performance,
I'd like to offer another perspective.

    
    
      1980: Underwriters Morgan Stanley and Hambrecht & Quist take Apple
      Computer public in the largest IPO since Ford Motor Company went
      public in 1956. Originally filed to sell at US$14 a share, the stock
      opens at $22 and all 4.6 million shares sell out in minutes. The stock
      rises almost 32 percent on its first day of trading to close at US$29, 
      giving the company a market valuation of US$1.778 billion. For fiscal
      year 1980, Apple showed a profit of US$11.7 million, or 24 cents a share 
      on revenue of US$118 million (compared to US$8.3 billion in fiscal
      2004), giving the IPO a P/E ratio of 92. Of Apple's 1,000 employees,
      more than 40 become instant millionaires thanks to their stock options.
      [1]
    

Facebook's P/E ratio today (5/29/12): 92.31

Apple's P/E ratio in 1980: 92

Fun fact: Apple's stock was down 20.44% a year after they went public.

[1] -
[http://www.macobserver.com/columns/thisweek/2004/20041218.sh...](http://www.macobserver.com/columns/thisweek/2004/20041218.shtml)

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josscrowcroft
That is interesting. Thanks!

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solipsist
Glad I could help. Just remember that numbers aren't everything. I personally
would not buy Facebook at this time due to other reasons...

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smartwater
And those reasons are?

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solipsist
Can't really pinpoint it to one thing. What I was trying to get across was the
fact that numbers (P/E ratios, etc.) should only be a _factor_ in one's
purchases. I think that when you look at Facebook, the market it is in, and
its revenue model, and then compare it to Apple back in 1980, there are some
stark contrasts you'll find. Sure, there's hindsight bias and all, but I
personally feel that Facebook has entered a market where making money is a lot
harder that it was for Apple. In order for Facebook to grow a few order of
magnitudes, I feel that there would need to be a radical shift in the way we
Internet users feel about spending money online or else the way advertisers
reach potential customers.

But I just looked at your profile... and wow! That's one impressive resume!
I'd be a lot more interested in hearing _your_ perspective on Facebook and its
financial strength, etc. This is one of those moments where I'd really wish HN
had a PM system.

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smartwater
Their ad system is going to make them a lot of money someday. I'm going to buy
when I see the early signs of them finally figuring out how to bring their ad
system up to par with Google Adwords, before the mainstream realizes it. It
will definitely get there, it's just a matter of time.

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greg7mdp
People remember and talk about the great stock purchase they made, while the
painful memories of terrible investments are repressed and seldom mentioned.

They is no guarantee that Facebook stock will significantly appreciate...
indeed many believe that it is overvalued and will keep go down, which is why
they are selling the stock these days and the price is going down.

If you want to gamble with your money, go ahead and purchase a speculative
stock like FB, you are taking a big risk for a potential big reward. I
personally think it would be wiser (but surely less exciting) to purchase low
cost index funds with your money.

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josscrowcroft
Solid advice, thanks!

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pmorici
The p/e ratio is still in the 90's if they don't show generous increases in
their profit or revenue then the price has a lot further to fall.

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ezl
Is the price low?

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NonEUCitizen
Its price is not low.

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adrianwaj
Well, they've got everyone hooked now on their network so they just need to
start charging for each time you do something on it. The bigger the addict,
the more they can charge.

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onlyup
What? Facebook is never going to work that way.

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adrianwaj
You'd be surprised. But if you say so.

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onlyup
Do you have any examples of massive businesses similar to Facebook changing
their model to something like you suggest?

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adrianwaj
Google maps now charge, don't they? Or is it just to volume users? I mean if
FB has a monopoly, they can do anything they want. They can limit their free
service to 45 mins per month or <250 friends. I personally think if they are
passing off information to government, then gov will bankroll them to some
extent for favors. Collusion? That's just a loaded word, it's all business in
the end.

add: more likely they'll just package up some enterprise plan for Fortune
100/500 companies with special analytics, features, etc by building around a
set of their most requested features from such companies.

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stewie2
In long-term, facebook will be the next AOL. Think about it.

