Facebook's stock plunge: Time to buy?
After a nosedive to a new low of just under $20 a share, it's either a sweet deal -- or a trap.
On Thursday, Facebook's (FB) shares dropped to their lowest level since the social media giant went public in May, as investors who were locked into holding 271 million shares became eligible to sell -- and sell they did. The stock, which debuted at $38 a share then briefly peaked at $45 a share, slid below $20 for the first time, closing at $19.87.
That was bad news for CEO and founder Mark Zuckerberg, whose fortune shrank by $600 million, to a still-hefty $10.2 billion. But while Zuckerberg can't sell his stock unit until the end of the year, any investor can now snap up a piece of Facebook, says Lee Brodie at CNBC. And several analysts say that "if you don't buy now, you'll kick yourself in days to come."
At just below $20 a share, is it finally time to buy Facebook stock?
Buying now is a no-brainer: So "Facebook, the one-time darling of the social media investment community has fallen from grace," says Sherli Looi at Forbes. That's great: At $20, smart investors have a great opportunity to buy into a promising money-maker at a bargain price. "What is a fair value for Facebook? The answer can range between $30 or $55 a share," depending on whether the company captures "a measly 2% share of the global ads spend of $600 billion per year, or a more reasonable 5% share." Either way, the future looks bright for Facebook and its investors.
No. Facebook shares are still too pricey: Even with all the "carnage in Facebook shares" and new-found optimism among financial analysts, the company's stock still looks expensive, says Steven Russolillo at The Wall Street Journal. Facebook's revenue and new-member growth are slowing, costs are rising, and nobody is sure how -- or if -- Facebook is going to cash in on its billion users. Besides, its price-to-earning ratio is much higher than other tech titans, which alone suggests Facebook's "stock price remains too high relative to projected earnings, and could fall further."
If you buy now, know that it's high risk, high reward: The Facebook bears might be right, but "there's certainly a compelling reason to think about Facebook at or around $20 a share," says Matt Krantz at USA Today. Regular investors finally "have a shot at sweet revenge," since this is the rare time they could "make more on a hotly anticipated IPO than wealthy clients of investment banks" who bought at $38. Or not. The bottom line is that buying now is "an outsized and pricey risk," and most investors are better off with a diversified basket of large companies. "Speculators, though, cannot ignore a stock that's so down on its luck."
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I think if you bought Facebook at the IPO share price it might be a better time to sell. Since it traded just $0.01 above the battle of midway today there is still a chance to get out and say, “Well, at least I didn’t lose most of my money”, instead of, “Crap, I just lost all of my money”. Of course, that assumes you didn’t leverage your investment to the max, like many FB buyers and sellers did.
On the other hand, if you don’t own FB shares yet (and that’s very rare if you really think about it), you could buy now and then wait for it to trade at $9.51 before facing the fate of those in the paragraph above. Have at it.
I am sooo lovin’ right now those $20 puts I bought when the stock was trading at $26.
Is it ever a good time to play chicken with a train?
Is it ever a good idea to play Russian Roulette with a fully loaded semi-auto gun?
Is it ever a wise move to burn money in hopes it will magically multiply?
Need I go on or have I made the point quite clear?
I wouldn't buy that crap with YOUR money! It is all "smoke and mirrors" like several others of those social networking companies. It reminds me of the dot-com bubble of several years ago. I carefully stayed far away from those stocks then, just as I am with FB. My son also stayed away, on my advise, and has thanked me more than once about that.
All of this social networking is a fad that will die a natural, but agonizing, death in a few years.
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