Wednesday, January 30, 2013

I am going crazy

There must be something wrong with me. Despite all clues pointing to the Emperor's clothes being transparent, they continue to not see. I am, of course, talking about facebook's revitalised stock price. Even with all these sad-sacks throwing millions of dollars in ad revenue at FB, I do not know how on earth the stock price can possibly reflect reality.

Google is a proven cash cow / golden goose hybrid with a proven revenue earning model, with net revenue of  $2.89 billion (great), a stock price of $758 and an earnings per share ratio of 32 (very good). To put it another way, for every share out there the company is earning an incredible $24,256.

Apple has a very strong revenue model (high profit margins), with net revenue of $13.1 billion (wow), a stock price of $459 and an earnings per share ratio of 44.1 (amazing). To put it another way, for every share out there the company is earning an amazing $20,241.

Ebay is a business built upon a core revenue model, with net revenue of $3.38 billion (great),  a stock price of $56 and an earnings per share ratio of 2 (goodish). To put it another way, for every share out there the company is earning $113.

Facebook is a 'business' built around doing social stuff ... oh, and embedding annoying ads that no one clicks on and/or games that no one buys premium stuff for, with net revenue last quarter of $131 million (fine), a stock price of $31 and an earnings per share ratio of 0.11 (ugh). To put it another way, for every share out there the company is earning $3.41.


Am I missing something? Do those numbers not disturb you? In response facebook is performing a $2 billion buy back to improve the health of their EPS (earnings per share) ratio. When facebook's company is apparently worth the same as Google or Apple but doesn't have anything resembling the net revenue or earning potential, how can this not be a dollar share?

I'll leave it for you to mull over. Class dismissed.