Why Facebook's Stock is Tanking

I just don't get the excitement for this as a stock traded company.

Maybe I just don't understand the business model, but Facebook does nothing ( I do not have an account) and provides nothing of interest to most people other than a place to put pictures of your child or dog.

I don't think anyone is surprised, I'd bet you couldn't get $2 for it in a year.

Facebook doesn't do "nothing", sir. Their profit last year is close to a BILLION dollars.

However, 100+ bil for it is way over the top.
 
Meh,

That fact that trading closed pretty much on par with the offer price on the day of the IPO is a good sign that Facebook did a good IPO.

If the stock takes off on IPO day, it means you made an undervalued offer, and you should have asked more for it (*cough* Google *cough*).
 
The Facebook IPO was a nearly perfect IPO. An IPO that skyrockets in price on day one means the original investors lost out on money they could have made.
 
Your bitter "facebook is worthless" spiel is way over the top.

The idea of massively interconnected social networks has a lot of intrinsic value. Facebook as a company probably isn't worth anywhere near their market valuation, but they are valuable. Let's not forget they're making billions a year off "random unsolicited advertisements" :rolleyes: as you say.

These types of social networks aren't going anywhere. Clever individuals either working for facebook or against will find ways to make them even more ubiquitous in our lives and then capitalize on that whether we like it or not. All the nerd rage in the world wont stop that train from coming to town.

I agree. It has value. Just not 100 billion. If they'd opened at say a quarter or less of that it may have been valued correctly and maybe even had room to grow. Where it opened though gives it one consistent direction to go. Down and my guess if fast.

Than again I'm just talking out of my ass, but 100 billion seems way out there for the profit they turn and the fact that facebook is likely at or near it's peak as far as an active user base is concerned.
 
The problem is Facebook's largest secret, their ads aren't as effective as Googles. And should advertisers on a large scale figure that out, they will leave.

That's not even a little bit of a secret to anyone. Advertisers get plenty of data on where their customers are coming from and can decide for themselves if it's worth the purchase price for advertising on Facebook.

The fact they continue to buy ads is telling.
 
It provides mass quantities of voluntarily user-submitted personal and demographic data to advertisers, which is what any "free" internet service company does. You're the product, not the customer.

..but is it worth $100 billion? I don't think so.
 
That's not even a little bit of a secret to anyone. Advertisers get plenty of data on where their customers are coming from and can decide for themselves if it's worth the purchase price for advertising on Facebook.

The fact they continue to buy ads is telling.

Unless you're General Motors.
 
either I'm confused or many posts in this thread are confused because I don't think the value is in ads, per se. That is, not the ones in front of Facebook users. People keep questioning just how valuable those are but the data that is being mined and sold is statistical data on user habit. With a user base as large as the largest nations the user base activity is potentially extraordinary.

The information is useful for ads on TV at 8pm or what gets placed in the endcaps at your local grocery market. Product tie-ins and etc. The click throughs aren't nothing but I suspect they are the smallest slice of the pie.

The reason I think the stock is "tanking" (and I'm not certain it is, it's only been a few days) is because traditional investors don't know what the heck this thing is. They don't know if they can trust a young upstart with no corporate experience and apparently an utter lack of respect for the establishment. Those things mean something to Wall Street. To geeks it's another story.

For example, if you walk into a traditional investment firm and ask someone his or her perspective you'll probably receive a response like, well where can this thing grow, how can it evolve? The only reason Google gets a pass is because it started to do what other companies do: invest far and wide and become less of a gamble.

Wall Street, for all it's speculation, doesn't like to gamble. They like to speculate and screw people but they don't like to put *their* money up on the block and see what happens when the winds blow. Facebook and Mark are an upstart gamble to Wall Street. But that's how he started and I don't see much changing. A lot hinges on a single person and he's demonstrating that by retaining control of the company. That will work out great if he excels but if he falters down goes the ship.

I doubt my grandfather would invest in FB but I suspect my grandchildren will wonder why I didn't.
There's a generational rift occurring and it's not just with FB it's playing out in the role technology is expected to play in the future.
 
Facebook ads certainly have a low "click through" rate compared to Google and other search engines, but they still have a gazillion users that advertisers can get ads in front of.

It's no different than buying ads on television. Get a TON of eyeballs on the ad.. that's it.

The difference with TV is that you cant ignore the ad. People have grown pretty accustomed to just tuning out the crap they dont want to see online. Our eyes are trained to avoid ads. Ever notice how obnoxious it is when you see some full page interstitial, or video clip with 30 second ad before you even see the material? Yet this is what we put up with on tv every day.
 
I did some math one day

At their IPO price, that makes each and every person who actually USES facebook worth $141. Do you know how much stuff would have to be bought through facebook to collect that kind of cash? Seriously?

Using some rough numbers with an average profit of 35% per item sold of which facebook would get 10% of those profits from advertising (3.5% total) (And that's a pipe dream)

Each of us have to buy $4028.57 worth of stuff through facebook to break even.

WTF were they thinking?
 
When it comes to tech stocks, I have a 100% hit rate. I have never taken a loss

I invested in Amazon on opening day
I invested in ATi on opening day
I invested in NVIDIA on opening day


The following companies will also be severly reduced or fail in the next couple years:

Hulu
Netflix

Hulu and Netflix will fail because individual service prodivers will want a bigger slice of the total pie by offering direct premium service without the need to go through a middleman like Hulu or Netflix. This will increase their profits, but fragment the market.

Sirus/XM-Services like Pandora/Last.fm with mobile broadband are will cut into them...hard


#1 Stock I believe to be overpriced:
Apple- They always choke. The iTV (or whatever they will call it) will fail. People will get tired of "upgrade itis" for mobile phones. Their iPod market has taken a nose dive. Apple has a history of creating really neat niche products, then falling flat on their face when everyone gets tired of them. Their closed eco system is hurting them.
 
The new winners: Broadband providers

AT&T
Verizon
Comcast etc....

We as a nation are used to getting what we want, and getting it now, whereever we are. Any as most of these companies are monopolies (or close to it duopolies)) we have no choice but to go through them to get what we want.
 
Facebook starting price is $100 billion

Facebook ending price is 72.22 Billion.

some dumbass people lost some serious value in their stocks.
 
#1 Stock I believe to be overpriced:
Apple- They always choke. The iTV (or whatever they will call it) will fail. People will get tired of "upgrade itis" for mobile phones. Their iPod market has taken a nose dive. Apple has a history of creating really neat niche products, then falling flat on their face when everyone gets tired of them. Their closed eco system is hurting them.

What are you basing this on? your own opinion? nobody will ever get tired of wanting the latest and greatest, and as long as Apple makes a compelling sales pitch, and they are one of the best at that, then they will have people flocking again and again. Their iPod market has taken a nose dive because Apple themselves created something to out-do it. Nobody wants to carry around an iPod + phone when they can just have the iPhone which does it all. Their niche products are what has propelled them to the top as it stands right now, and they have gained much more traction than they ever have in the past. Their computer market share is higher than it has ever been, and they have millions of people locked into their ecosystem, and people love them for it, because it's an ecosystem that actually works well.

Ever hear the saying "find your niche?" Well Apple did that. Their stock prices reflect that. Hell, they even have started to CREATE a niche. Tablets weren't hugely popular until the iPad, and as soon as it was announced, they had other companies rushing to compete.

I agree sirius-xm, hulu, and netflix are all going to fade out.

If you have a "100% hit rate," then why didn't you invest in Apple in 2001-2002, you could have made over 6x your money back if you sold today...
 
Apple is trading a lower forward P/E than the market. It's fun to be contrarian but the valuation doesn't seem to be stretched.

If you have a "100% hit rate," then why didn't you invest in Apple in 2001-2002, you could have made over 6x your money back if you sold today...

You need to check your math. :p AAPL got down to single digits in that time frame. It's now $561. Even at the high of $13 during that period you'd have made 42x your money now.
 
I'm still trying to figure out how they are pricing the company at $100 Billion when they only have an annual income of ~$3.6 billion - $4 Billion. Keep in mind i have not researched it at all because i realy don't care

Duh... it's because they'll be around for 25 years! so $4 bajillions * 25 = $100 bajillions!

:D
 
Looks like it closed at $34 today. Down 11% from the closing price yesterday, and 20% from yesterday's high. The big institutions that hold 73% of the stock are probably slowing going to sell their shares to minimize losses so I expect it to fall even more over the next week.
 
When it comes to tech stocks, I have a 100% hit rate. I have never taken a loss

#1 Stock I believe to be overpriced:
Apple- They always choke. The iTV (or whatever they will call it) will fail. People will get tired of "upgrade itis" for mobile phones. Their iPod market has taken a nose dive. Apple has a history of creating really neat niche products, then falling flat on their face when everyone gets tired of them. Their closed eco system is hurting them.

but did you get rich off those tech stocks?


I agree that apple is somewhat overpriced, getting a little ahead of itself, but I disagree with your other points.

As long as phone carriers subsidize, people will never get tired of upgradeitis. After a 2 year contract expires, consumers are onto their next phone upgrade.
when HTC and samsung phones are selling for $99-199, and iphones are selling for the same price, which do you think consumers will choose?

ipod market has fallen because iphone has replaced it.
 
What are you basing this on?

If you have a "100% hit rate," then why didn't you invest in Apple in 2001-2002, you could have made over 6x your money back if you sold today...

I said I have a 100% hit rate at never losing money. My average return rate is also 2.67x over 5 years over 40 different companies.

Apple IIe: Huge hit in schools. Apple 3 Huge MISS
300px-Apple_II_tranparent_800.png


Then this....
9_843-apple-macintosh.jpg


Remember what happened to Macintosh in the late 90's?....Microsoft didn't even want to touch them. They just wanted them to die quietly...they almost did if it wasn't for Steve Jobs.


Then the newton...initial hit, then massive failure
_NEWTON.GIF


Remember these? Huge Hit. Then Apple decided to cash in by making more colors...
apple_imac_350.jpg


Then it flopped in sales.

The iPod peaked in 2008 and it largely on the negative side of the curve now
400px-Ipod_sales_per_quarter.svg.png


Apples initial two attempts at iTV failed miserably. The TV business is cutthroat. Apple will not survive there. Microsoft also has serious inroads.

Competitors:

Google Android. Pro: Java language has more developers. System is open platform meaning multiple vendors and features allowing the user to select which system is right for them.

Microsoft: Don't count them out yet. Even though WP7 is struggling, Microsoft has a very well documented and designed plan for seemless integration between desktop and mobile. MS's WP7.5 also has very favorable reviews online. Apple is racing to merge the divide between it's mobile OS's and desktop OS's, but is years behind. Windows 8 comes out this fall.
 
What Apple fails to realize is that smart phones are becoming a COMMON COMMODITY. Features that everyone needs will become common place on all phones (due to Moore's law) Then Apple has to survive on being a niche market yet once again like they always have as they will offer no more compelling a device than other people at a similar commodity price.
 
And to answer your criticism about Apple and my not investing in it, their history has been too roller coaster for my taste.

I also invested in Samsung before the LCD TV craze started and it before the plasma/LCD TV wars began.

I invested in Linksys. (Well before pre Cisco acquisition)
 
If by "years behind" you're referring to Lion released in 2011 then I suppose you're correct.
 
What Apple fails to realize is that smart phones are becoming a COMMON COMMODITY. Features that everyone needs will become common place on all phones (due to Moore's law) Then Apple has to survive on being a niche market yet once again like they always have as they will offer no more compelling a device than other people at a similar commodity price.

which is exactly why anything but an iphone is seen as basically trash. Apple is the premium maker of smartphones. I guess that's what you get when you flood the market with shit free phones.
 
While Facebook can be cool, it's also creepy at the same time and I think that a lot of people are starting to see it as both. It's a great way to contact people but beyond that I try to use it and put as little information in it as possible.
 
"But with its business model still in flux and CEO Mark Zuckerberg's promise that the user will come first, perhaps it's a better bet to stay on the sidelines for now."

Yeah, the user needs to be second, LOL
 
Price will stabilize eventually, not worried about that... Yes Facebook is creepy as hell with all your info permanently posted somewhere on the net, or deleted-but-not-really-deleted, yet people seem to like that somehow.
 
I just don't get the excitement for this as a stock traded company.

Maybe I just don't understand the business model, but Facebook does nothing ( I do not have an account) and provides nothing of interest to most people other than a place to put pictures of your child or dog.

I don't think anyone is surprised, I'd bet you couldn't get $2 for it in a year.

It looks like you do not know the worth of personal information when it's for sale to advertisers.

The worth of personal information to the advertisers is high. But Facebook is just throwing random ads at its users. My mother has an account and the ads look, well, random and irrelevant to her likes. That's why GM pulled its ad campaign from FB. The impact per ad dollar isn't there. When they figure out how to smartly serve ads according to the users like, they will be worth lots of money. Maybe not $100 B lots of money.
 
The point that you are missing, is that they know YOU are who they should be putting video card ads in front of. Other folks, who are a lot like you, are going to click on the ad while uploading pics of their pets.

No, that's not the point. The advertisers want clicks, not just views. Google can generate clicks for the advertisers, that's the difference. Just because I saw an ad about a videocard while I was posting pictures of my car on facebook, does not mean I will click it. Someone who is searching for information about a vacation to hawaii is more likely to click an ad that pops up about hawaiian vacations while they're doing that search or browsing hotels on google maps.

Facebook has no method to display an ad when someone is actively looking for something. All they can do is display ads when people are posting photos, videos, messages, etc.

Factor that in with no visible path for growth in the market(the advertising market), and it's easy to see why the stock was over-valued.
 
Facebook opened at like 130x P/E. Apple is valued at around 13x P/E. That is just freaking stupid. It is worth maybe 1/10th of the valuation it was given (1 trillion pennies ;)).
 
Facebook opened at like 130x P/E. Apple is valued at around 13x P/E. That is just freaking stupid. It is worth maybe 1/10th of the valuation it was given (1 trillion pennies ;)).

I think google is only something like 4-6x. Even apple is called over-valued on occasion, but the 100x facebook stock pricing was idiotic.
 
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