NEW YORK ( TheStreet) -- I ruffled some feathers recently when I suggested that the larger-than-life event known as the highly anticipated IPO of social media giant Facebook (FB) has been embroidered in hysteria and blown entirely out of proportion. As popular as Facebook has become, the exaggerated valuation defies logic.
Indeed Facebook is a good idea with a concept that is unequivocally successful. But not only does it have no business being compared to names such as Apple (AAPL) and Google (GOOG), the company has yet to prove that it has a business -- at least one that is sustainable.
What Is the Value of Social Media?
Facebook said recently it earned over $1 billion during the first quarter while also reporting a 12% decline in net income from the year earlier. All of the decline was attributed to an increase in spending. While not entirely a huge concern, it does raise some red flags.
Fundamentally, how does one place a quantifiable value on social media -- a nontangible product? As a value investor, I have no answer based on fundamental analysis.I have scoured recent IPO data from names such as Pandora Media (P), Groupon (GRPN) as well as LinkedIn (LNKD) and what I've found were pretty mixed results. As with Facebook each of these stocks generated more than their share of interest from the stock market and -- just like Facebook - none had any discernible or sustainable business from which to fairly appraise value. In assessing what to expect from Facebook as a public concern, we can look at these three names and ask, if we had to do it all over again, would we still have made the investment?
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV