My advice: Ignore their advice.
Time to friend Facebook Inc (NASDAQ:FB)?
Finally, we turn to what’s probably the most famous stock on today’s list: Facebook Inc (NASDAQ:FB), which today scored an upgrade to “buy” from Argus Research, and an initiation at “strong buy” from Oracle Investment Research.
According to StreetInsider.com, Oracle particularly likes the new “Facebook Home” feature being rolled out on HTC phones. Likes it so much, apparently, that Oracle’s willing to slap a $38 price tag on this stock, which currently costs only $27, and to promise investors a near 40% profit if they’ll just buy Facebook Inc (NASDAQ:FB) shares today.
Priced at a simply astounding 1,800 times earnings today, Facebook Inc (NASDAQ:FB) is, on its face, too expensive for any sane investor to want to buy. Granted, there are quibbles with that valuation. Free cash flow at the firm, for example, is much stronger than reported GAAP income. So much so that valued on free cash, Facebook Inc (NASDAQ:FB) stock actually only costs about 170 times FCF.
But honestly, that’s neither here nor there. Call Facebook Inc (NASDAQ:FB) a “170 P/FCF stock” or call it a “1,800 P/E stock” — either way, the valuation on this one is far too great for Facebook’s projected 29% profits growth rate to justify. While it’s a fine business and an invaluable service, there’s just no way this stock can pay off as an investment.
My advice: “Friend” this stock at your peril.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook.
The article Friday’s Top Upgrades (and Downgrades) originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.