Facebook: A Strong Buy
The idea that Facebook is overvalued is just insane.
by Rod D. Martin
May 25, 2012
Yes, Facebook as a "strong buy" probably seems counterintuitive, or perhaps a couple weeks out of date.
But that's exactly the point. If you're doing what everyone else is doing, you'll get the same results.
The idea that Facebook is overvalued is just insane. It's mass jealousy. It's a sick joke.
A week ago the stock debuted at $38. It got as high as $45. With LinkedIn's quick double on their minds, analysts at Sterne Agee and Morningstar had predicted far more.
It closed today at $31.91. My guess is it will get worse before it gets better. It's getting thrashed in the media. Summer is coming (the equivalent of "Winter is coming" for all you Game of Thrones fans). Nothing good will happen before Labor Day, and maybe not then.
But good things will happen. Very good things.
Facebook was priced to perfection, and that's a perfectly good thing. It means that the people who did all the work got the money they should have received. IPOs don't exist so that you, some random investor sitting at home with your E*Trade account, can make a quick double as though at a casino. IPOs exist so that companies can raise capital to expand their operations, and so that the people who sacrificed and sweated for years can get a fair return on their Herculean labor.
Think about it. Mark Zuckerberg, Peter Thiel et al. built this thing from nothing. They did it while the world laughed at them, while everyone told them MySpace was king, while everyone said (and some are still saying) that they'll never successfully monetize a non-subscription based social network. More to the point, they did it, period, and you did not.
So why should you get a double on opening day at their expense? Why should they leave half their money on the table, half of what the thing is really worth?
$38 was the right price. $38 left plenty of room for the company to grow organically. The market is now punishing Facebook for failing to cut everyone else in, as though Goldman Sachs and CNBC and all the rest are so many Don Fanuccis, demanding Zuck "wet their beaks."
Pathetic.
Facebook is an incredible company. It already dominates its space; it is poised to rival Google in advertising as well. It's worth a fortune. All the naysayers in the world can't change that.
All they can do is create an opportunity for us.
As things turned out, you'll get your chance for a double, maybe even a triple, if you can be patient. It probably won't happen before the end of this year. It may take a year, 18 months at the outside. But mark my words, Facebook will blow past its IPO price on its way to $60 or $80.
Looking back from that little time away, are you going to care about today's non-stop attacks on the stock? Will you care if it hits $25 in between?
No you will not. You'll just count your money and laugh at the idiots who called it a pump-and-dump.
They're a bunch of vultures, preying on the fears of the crowd. We're betting on the future. And the future belongs to Facebook.