NEW YORK (TheStreet) -- I've never been a big fan of Facebook (FB), definitely not the stock, and perhaps to a lesser extent, the application. The stock is ridiculously priced at 208 times trailing earnings, 48 times 2014 consensus earnings estimates, more than 10 times book value, and 18 times revenue. Keep in mind that these sentiments are from a value investor, who simply can't fathom those multiples, and growth investors would make the argument that those measures are irrelevant in Facebook's case.1 million advertisers. That's impressive, and one of the reasons that investors are re-engaged.
There is no doubt that some investors have made money from owning the stock, and I am not discounting the possibility that shares may run even higher. We've seen countless examples of overvalued companies continuing to head higher -- well beyond their true value. It's yet another example of the inefficiencies that make the markets and investor psychology so fascinating. Investors will continue to buy names, such as Facebook, that are priced for perfection.
In the past few days, two things happened, neither of which relates to the company's financials, that have me again questioning Facebook's prospects. Granted, these are completely anecdotal in nature and their relevance is more from the gut, than from the mind. In fact, I was not even planning on writing about Facebook today, but can't help myself.The first thing was an article in our newspaper entitled "Facebook's Fall From Cool," written by a local high school student. In the article, the young author proclaims that Facebook has become an "obligation," as opposed to a "source of entertainment." Now, that may be nothing new. The article itself caused me to quiz my own teenagers, who told me in no uncertain terms, that kids have turned away from Facebook, and would rather use Twitter or Instagram.
Select the service that is right for you!COMPARE ALL SERVICES
- $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
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV