The price of Facebook shares continue to fall. It was listed at $38 (USD) a share and has now dropped to $18. Read this.
I believe that a fair price is $10, giving it a high multiple of 25 times of earnings. There is still some way to go down, but it can happen quite fast. It seemed to be a one way street now.
I hope that people will learn from the lesson of Facebook and know that this will also apply to other assets with inflated values - such as property prices in Singapore.
I believe that a fair price is $10, giving it a high multiple of 25 times of earnings. There is still some way to go down, but it can happen quite fast. It seemed to be a one way street now.
I hope that people will learn from the lesson of Facebook and know that this will also apply to other assets with inflated values - such as property prices in Singapore.
4 comments:
Property prices in Singapore is inflated. I personally do not care if the private property bubble burst or not, as I am too poor to own one.
What need more calibrated and more thinking is the Public HBD sector.
Sure, it will suffer drop in value as well. Again, I personally could not care, as mine is fully "paid" although I do not own it.
Do I worry ? You bet. What about my children' HDB ..... Singaporeans' HDB.
A reader of this blog also predicted FB share should be US$10 at 25 times earnings.
Maybe would happen this October, this year the stock market displays its historical characteristic of selling in May and pack up for a holiday in June/July. Usually this would follow up with an Equity October massacre, and with the American Presidential Election hot on the heels, would then reverse sharply to catch every investor by surprise.
Would Equity follow the same pattern?
A kiasi investor would avoid the share market now, and wait, keeping Warren buffett's famous words in mind -
Enter when others fear to tread, and run when others are piling in, something like that.
Meanwhile, attend SGX and SIAS investment seminars to learn, but make judgements yourself, use the head, not the heart.
Heard that Warren Buffett's wife wan also to make a pile from Singapore. She's giving a talk on value investing, costing $88 each attendee.
Would rather read books on Warren Buffett, and save the money.
Why FB should be avoided.
1) It's an internet stock, all such stocks are highly dangerous, just like Apple, 10 years ago after the Dot Com bust, it's selling at a few dollars, now about $600 to $700. It's so unbelievable that you must be God to get so right, could go other way and become junk share.
2) The listing price of FB is $38 at a greedy 100 multiples, IPO sellers knew it's a hype stock that they must cash out some fast, knowing well the business could not be sustained at that price. If sellers are confident of their business model, they would price IPO much lower, confident the stock price would rise later. So a very high priced IPO is the most dangerous IPO to invest in.
3) FB is a novelty stock, like the novelty of a restaurant, when a new kid with better offering comes up, all the customers would leave the former to try the new restaurant.
4) Reported that FB is going into internet gambling to increase earnings, but US law forbids such business, so maybe could try outside America. Many Funds do not invest in gambling stocks, maybe could only attract hedge funds, which are aggressive stock traders.
5) FB can't beat Google, the latter with its simplicity in usage and world wide acceptance like a staple food to be consumed daily, simplicity sells, like the Apple I- Phone. Thus Google could survive so well just on the Advertisment business itself.
6) If some other IT Company comes up with a better networking model, FB would be wiped out and become junk stock.
There will be 1.2 billion FB shares free up in Novenmber. So, I believe share price will be suppressed for a few more months. I believe PE multiple of 10 is about right
Facebook has a lot of active followers although not as many as they claim. If they execute their plan right, then they could go back up to 38
Post a Comment