Ask HN: Should I buy Facebook stock while the price is low? | Hacker News Reader

Ask HN: Should I buy Facebook stock while the price is low?

I always hear anecdotal stories of people whose uncles bought them a chunk of Apple stock when it was in the double-figure value (and are now loaded, or at least fully-funded through college or starting a business, etc.)

With this in mind - should I buy a small-ish amount of FB stock, as a long-term investment, given how low the price is falling?

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As most of the HN crowd is skeptical of Facebook's future stock performance, I'd like to offer another perspective.

  1980: Underwriters Morgan Stanley and Hambrecht & Quist take Apple
  Computer public in the largest IPO since Ford Motor Company went
  public in 1956. Originally filed to sell at US$14 a share, the stock
  opens at $22 and all 4.6 million shares sell out in minutes. The stock
  rises almost 32 percent on its first day of trading to close at US$29, 
  giving the company a market valuation of US$1.778 billion. For fiscal
  year 1980, Apple showed a profit of US$11.7 million, or 24 cents a share 
  on revenue of US$118 million (compared to US$8.3 billion in fiscal
  2004), giving the IPO a P/E ratio of 92. Of Apple's 1,000 employees,
  more than 40 become instant millionaires thanks to their stock options.
  [1]

Facebook's P/E ratio today (5/29/12): 92.31

Apple's P/E ratio in 1980: 92

Fun fact: Apple's stock was down 20.44% a year after they went public.

[1] - http://www.macobserver.com/columns/thisweek/2004/20041218.sh...

That is interesting. Thanks!

Glad I could help. Just remember that numbers aren't everything. I personally would not buy Facebook at this time due to other reasons...

And those reasons are?

Can't really pinpoint it to one thing. What I was trying to get across was the fact that numbers (P/E ratios, etc.) should only be a factor in one's purchases. I think that when you look at Facebook, the market it is in, and its revenue model, and then compare it to Apple back in 1980, there are some stark contrasts you'll find. Sure, there's hindsight bias and all, but I personally feel that Facebook has entered a market where making money is a lot harder that it was for Apple. In order for Facebook to grow a few order of magnitudes, I feel that there would need to be a radical shift in the way we Internet users feel about spending money online or else the way advertisers reach potential customers.

But I just looked at your profile... and wow! That's one impressive resume! I'd be a lot more interested in hearing your perspective on Facebook and its financial strength, etc. This is one of those moments where I'd really wish HN had a PM system.

Their ad system is going to make them a lot of money someday. I'm going to buy when I see the early signs of them finally figuring out how to bring their ad system up to par with Google Adwords, before the mainstream realizes it. It will definitely get there, it's just a matter of time.

Ditto what solipsist said - I'd love to hear more input on this!

People remember and talk about the great stock purchase they made, while the painful memories of terrible investments are repressed and seldom mentioned.

They is no guarantee that Facebook stock will significantly appreciate... indeed many believe that it is overvalued and will keep go down, which is why they are selling the stock these days and the price is going down.

If you want to gamble with your money, go ahead and purchase a speculative stock like FB, you are taking a big risk for a potential big reward. I personally think it would be wiser (but surely less exciting) to purchase low cost index funds with your money.

Solid advice, thanks!

The p/e ratio is still in the 90's if they don't show generous increases in their profit or revenue then the price has a lot further to fall.

Is the price low?

Its price is not low.

Well, they've got everyone hooked now on their network so they just need to start charging for each time you do something on it. The bigger the addict, the more they can charge.

What? Facebook is never going to work that way.

You'd be surprised. But if you say so.

Do you have any examples of massive businesses similar to Facebook changing their model to something like you suggest?

Google maps now charge, don't they? Or is it just to volume users? I mean if FB has a monopoly, they can do anything they want. They can limit their free service to 45 mins per month or <250 friends. I personally think if they are passing off information to government, then gov will bankroll them to some extent for favors. Collusion? That's just a loaded word, it's all business in the end.

add: more likely they'll just package up some enterprise plan for Fortune 100/500 companies with special analytics, features, etc by building around a set of their most requested features from such companies.

In that case, there will be another free social network.

In long-term, facebook will be the next AOL. Think about it.

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