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.

Facebook Inc. (FB)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.

Please see these related FB articles:

Clicks are Worthless ot Facebook?

It’s Facebook v. Timelines in a Courtroom

Facebook Adds Video and Voice to Its iOS App

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!