Facebook Inc (FB): How About That Mobile?

Page 2 of 2

Are They Investable?

That’s always a tough question for a guy like me, especially when we’re talking about the technology sector. See, I believe that companies such as Intel Corporation (NASDAQ:INTC), or International Business Machines Corp. (NYSE:IBM) could play out to be great investments over the long term, but these new companies are unproven.

Taking a company like Facebook Inc (NASDAQ:FB) into example, we can see that they are extremely overvalued. They’re trading with a P/E ratio in the thousands. I don’t even need to compare that to industry to tell you that it’s extortionate. Facebook would need every human on Earth, and some additional revenue per user in order to justify that P/E ratio, at least in my eyes.

When it comes to the analysts, they believe that Facebook is a winner. Six of the twelve analysts that are covering the stock say that you should buy it, and they even believe that the company will grow at some 33% per year.

Now on to Yelp! This $2.2 billion company sells advertising both on their website and on their mobile apps. Like Facebook, they’re expected to grow quite well into the future. The company’s five-year growth rate according to analysts is a nice 15%. That’s beating the S&P 500.

Groupon is expected to see better growth that Yelp, but it is without a doubt the most disliked company of the bunch. The highest rating they have from analysts is a ‘hold,’ not something we’re used to seeing in the fast-paced world of internet companies.

The growth we’re expected to see over the next five-years is around about 22.4%. That’s some incredible growth from a company that’s simply a ‘hold.’

Investor Takeaway

Out of the three companies I would opt for purchasing Groupon if I had to buy any at all. Groupon Inc (NASDAQ:GRPN) is the only company here that’s actually selling something other than advertising. They’re also doing quite well in the mobile space, selling 30% of Groupons via that method.

I could see why people would want to invest in Facebook but with some teens quickly losing interest, could gains in this stock just be a pipe dream? Of course, those same kids listed Instagram as their top social network, so Facebook is still collecting a big piece of the pie.

I would say Facebook is a hold, I wouldn’t rush out to buy it, but I may consider it sometime in the future when things are looking settled down.

Yelp is another holder for me. They do great work in providing revues to consumers, but their market could be easily wiped out if a company such as Google, or even Facebook decided to pursue it. I’d definitely tread with caution around Yelp.

The article Facebook Performs Well in Mobile: Time to Buy? originally appeared on Fool.com is written by Ash Anderson.

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

Page 2 of 2