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10 Expert Takes on Facebook Stock at $19, Half the IPO Price

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Is now the time to bite? These investing professionals are not convinced.

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MINYANVILLE ORIGINAL "I'm rooting for Facebook, I really am, but this is one IPO investors shouldn't touch."

That blunt comment from Conor Sen, a
Minyanville contributor, private investor, and former hedge fund manager, sums up much of the sentiment elicited from our community of Wall Street professionals last May when we published 10 Takes on the Facebook IPO From Investing Experts.

Now, nearly six months later, the stock is trading at half of its IPO price. So where does Facebook go next? Is it time for the skeptics to jump in? We went back to our panel to find out.

As you watch Mark Zuckerberg speak at the TechCrunch Disrupt conference today, keep these sharp criticisms -- and reasons for optimism -- top of mind.


At $18ish, Facebook Now Fairly Valued
By Conor Sen

When we first brought up Facebook, I wrote, "Growing revenues at 30-40% per year would be terrific for most businesses, but in this environment that should command a multiple of more like 6-8x sales, not 20-25x." Let's do the math on that. Assume around $5 billion in revenues this year. Six to eight times that would be $30 billion - $40 billion. Tack on the $10 billion in cash the company has and that gets you to a market cap of $40 billion - $50 billion. With 2.76 billion fully diluted shares outstanding, that gets you to a price of $14.50 - $18/share. We're around the upper band of what I'd consider fair value.

From here, factors to take into consideration include the overhang from insiders selling their stakes between now and the end of the year, and the possibility of the business getting better or worse over the next several quarters or years. In other words, fairly typical concerns for any newly listed stock. In the near term, I think the supply worries will keep the stock from appreciating too much, but we're approaching the level where longer-term value investors should get interested. And it's possible that it will be included in the Nasdaq 100 in December, which would create new demand for the stock.

Bottom line: At these prices, I'm moderately optimistic on Facebook.

(Position in FB derivatives)

Conor Sen is currently a private investor, and recently spent more than four years at a multi-billion-dollar West Coast-based hedge fund. Follow him on Twitter at @conorsen. Find his recent articles for Minyanville, here.


Why Didn't I Short It?!
By Fil Zucchi

With Facebook's stock now at $18, the first thing that jumps out at me is that I should have shorted the heck out of it rather than just watching it plunge. Regrets aside, I continue to think that Facebook's morphing away from its current use and more toward a "commerce" concept will take a long time and is hardly a sure thing. The sentiment around the stock is hideous, so a bounce is always possible. But all things being equal, I'm not really interested in getting long until this one is a single-digit midget. At those prices, there is probably enough in the "name" alone to act as a cushion as the business shakes out. I'm watching puts prices for no cost ratio spreads that would get me long at $10, but so far there is nothing really interesting.

Fil Zucchi is the founder and manager of Zebra Investment Advisors LLC, a Virginia registered investment advisor, and Zebra Fund, LLC, a long/short hedge fund. Look for his recent stories, here.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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