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Comment by dweekly | Hacker News Reader

Over 200 (+10%) in the after-hours! https://www.google.com/search?q=NASDAQ:FB

While P/E ratio is back up to 24 (after December's low of 17) that's still way more conservative than their 70-80 range a chunk after IPO: https://www.macrotrends.net/stocks/charts/FB/facebook/pe-rat...

That says to me that the markets are pricing Facebook as a relatively well-characterized business at this point and don't see the likely fines as material to the business.

(Disclaimers: I own no shares or options of FB nor am I planning to acquire any. I am a former employee.)

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Apple had a P/E ratio of something like 12-13 and then went on to more than double it’s stock price. Markets are not always very wise.

A P/E ratio of 13 seems tiny. I remember when AMZN was over 1000.

Yeah, I remember too: that was when they had giant opportunities for growth. Lower P/E means lower opportunity for growth. Apple's growth prospects are fairly low on the current trajectory of the company. They were also fairly low when it was 13, regardless of what the stock price did.

Apple and FB have very different cap structures so let’s compare their EV/EBITDAs not P/E. FB is ~16 and AAPL is ~12. Much closer from that perspective.

P/E ratios aren’t absolutes, they vary from industry to industry. Hardware companies have lower P/E ratios than software companies and Apple has traditionally been regarded as a hardware company.

Multiples like P/E are just a proxy for cash flows, discount rate, and growth. That P/E tends to stratify on industries makes sense not just because of growth, but also its sensitivity to capital structure. So asset heavy companies with lots of leverage will have different P/E ratios even with the same unlevered free cash flows.

I think that even didn't include their cash reserves.

Stupid question, aren't employees paid partly in stock?

Most are, but I assume the GP sold their stock, either while they were at FB or after they left.

At both Google and Facebook I elected the Autosale programs to immediately sell my company equity for cash and then immediately automatically reinvest the cash in an ETF portfolio (using Schwab Intelligent Portfolios). When autosale wasn't available I would habitually sell on the first open trading window day.

Why? Both of those stock have performed very well.

Risk. If you are an employee you are already have significant exposure to the risk of the business doing poorly, so it makes sense to diversify. Maybe frame it this way: if I handed you $20,000 to put in the stock market would you put it all in your employer's stock?

Because they perform well up until the point that they don't. By working at $Company, you're already invested heavily in their success. If a substantial portion of your net worth is also tied up in their stock, the company having problems may ruin you. Imagine: the stock price tanks due to some real issues, and then you get laid off. In one swoop you've lost both your salary and your savings.

If you'd instead sold some or all of your stock, you'd have a solid nest egg to fall back on. And companies doing very well up until the point that they suddenly explode is not exactly unheard of: consider Enron, or even Groupon or Zynga.

It's true that it's unlikely for FB to implode over the next year, but last year was real rough for the company: the July earnings went from 220 to ~160. If your whole savings is wrapped up in that, that's a scary drop. (You can say that it's recovered, but only partially and slowly).

Long story short: it's easy to pick the winners if you're looking backwards.

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