Should You Avoid Facebook Inc (FB)?

Facebook Inc (NASDAQ:FB) is a profitable company with a large competitive advantage of network effects and healthy margins. It has more than a billion users — probably the first company in the world to claim such a feat. The company has changed the way society interacts, and it knows more about you than your own mother.

But …

It is not yet a $50 billion-plus company, even though that’s its current market capitalization. And it shows no signs of becoming one in the near future. There’s still great potential for the company, but there are better places to put your money right now.

Facebook Inc (NASDAQ:FB)

A lack of a catalyst

Those billion-plus users each pay exactly $0 to be a member. Facebook Inc (NASDAQ:FB) earned only $1.35 in average revenue per user last quarter from advertising and payments. Unfortunately for Facebook Inc (NASDAQ:FB), there are no royalty payments for changing global culture, and it has yet to come up with a system to charge mothers for access to their children’s information.

The company sits on vast resources, but the monetization of such resources outside of advertising remains elusive. Additionally, companies are hesitant to commit advertising dollars to unproven platforms. The amount of money spent on Internet and mobile advertising lags the percentage of time Americans spend consuming that given media.

Meanwhile, spending in the established print advertising industry greatly outpaces the amount of time Americans actually consume it. The momentum toward online advertising, and especially mobile advertising, must pick up to match consumption. While this could mean a future windfall for Facebook Inc (NASDAQ:FB) and other online ad networks, they still need to prove the efficacy of their respective online and mobile advertising offerings.

And so Facebook remains expensive

With an undefined future, attempting to value Facebook Inc (NASDAQ:FB) is nearly impossible. There are still too many questions about monetization, just as there were a year ago. And in the meantime, Facebook will trade based on hype alone. There are better places to put your money while Facebook sorts out its future.

If a catalyst does come along, there will be plenty of time to pick up shares. If Facebook truly finds its monetization formula, paying a few percentage points more for the stock won’t hurt the enormous returns that could come. For now, keep your eyes on Facebook, but your wallet closed.

For things every investor needs to know about this revolutionary company, check out The Motley Fool’s newest premium research report on Facebook. Read up on whether there is anything more to “like” about it today to determine if Facebook deserves a place in your portfolio. Access your report by clicking here.

The article Stock Tip: Avoid Facebook originally appeared on Fool.com and is written by Dan Newman.

Fool contributor Dan Newman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

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!