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Barron's Pushes Facebook (NASDAQ:FB) Under $21, So Where Do We Go From Here?


Barron's says Facebook is worth $15. Are they insane?

But these are all more or less valid points, even if they're pretty much all well-known among the investing public.

Facebook is an outrageously expensive stock -- but that's not necessarily the worst thing in the world. A high P/E is not inherently bad (see: Provides Lesson on Dangers of Shorting High-Octane Momentum Stocks) and a low P/E is not inherently good (see: RIM: A Low P/E Does Not a Cheap Stock Make).

And when is a high P/E OK? When a company is firing on all cylinders, generating huge revenue growth, and destroying expectations. Think Fusion-io (FIO), which beat earnings expectations by 125% last quarter.

So that brings us to Facebook.

Here's the problem.

Mark Zuckerberg messed up big-time by raising investor expectations regarding mobile advertising monetization at the aforementioned TechCrunch conference. He has to keep a positive public appearance for the sake of employee morale and recruiting, but as investors, our concern is simply, what's priced in and what's not?

Zuckerberg always talks about Facebook's long-term potential -- at the conference, he very specifically mentioned measuring the company's success over a three- to five-year time horizon.

And this is why I think investors have taken this sentence way out of context: "I actually think it's a great time for people to join, and it's a great time for people to stay and double down."
Position in AAPL
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