The cover of this weekend's Barron's is a booming takedown of Facebook titled bluntly: Facebook Is Worth $15 (the stock closed $22.86 on Friday).
In other words, despite the massive plunge the stock has seen so far, it's got a lot more to fall.
The points made in the piece:
- The stock is trading at a PE of 48 and a forward PE of 36 times 2013 earnings.
- Meanwhile, Apple and Google trading at 16x 2012 earnings.
- It's also trading at 10x revenue, twice Google's valuation.
- Facebook is struggling with mobile monetization, and the management's response has been "trust us". The fact that it had to shell out $1 billion to buy Instagram is ominous.
- Mobile access grew from 9% to 11% in one quarter, a trend that's likely to continue to grow.
- The mobile ads it runs that are working are increasingly alienating users... Wal-Mart and Target ads that appear in the newstream are annoying.
- Demographics do not favor Facebook. It's getting less "cool."
- There are a lot more insider sales to come.
That's basically it: Nothing groundbreaking. But the bear case is simple: A stock doesn't deserve such a big multiple when it's business model is in doubt.
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