Facebook Inc. (FB) Analysis Says Stock is Not a Buy

Facebook Inc. (NASDAQ:FB) had a well-publicized rocky start a a publicly traded company in the weeks after its botched IPO last may, as the stock plummeted from a high of $40 to below $18 a share by September. However, in the weeks since, Facebook has made a steady climb back to respectability, gaining more than 60 percent since the lows, and the company is coming off an encouraging quarterly earnings report last month.

With the recovery, and some analysts placing price targets at or near the IPO price of $38 per share, that does tend to beg the question: Is Facebook Inc. (NASDAQ:FB) now a good buy play at $30 a share? And is it a long-term hold? Sean Tully of Fortune magazine takes a stab at analyzing Facebook ‘s stock and company prospects over the long term, and he makes the case that Facebook stock is not a buy, based on the long-term prospects.

Tully takes a look at where the stock is now and attempts to extrapolate what the stock has to do over the next 10 years to justify a long-term investment. He first makes the assumption that investors will want a 10-percent return per year, and makes the presumption that Facebook Inc. (NASDQ:FB) will be like many other established companies by adding float stock shares of about 2 percent a year (noting that many companies do issue more shares as as they mature). As the company’s current market cap is at $69 billion, Tully estimates that the company would need to have a market cap of more than $200 billion by 2022 in order to fulfill the annual 10-percent return.

By extension, Tully went on to make the argument that the current $1.3 billion profit would have to hit $15 billion by 2022 – which means 31-percent growth every year. What do you think? Is this realistic for Facebook Inc. (NASDAQ:FB)? Is Facebook and long-term buy and hold, or is it a fad stock for the short term? What is your take on the company? We’d like your thoughts in the comments section below.

DISCLOSURE: I own no positions in any stock mentioned.

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