With such lofty valuation even after a heavy haircut from the last 2 weeks, I think FB is still over-price giving current economic environment. FB already announced reduced revenues forecast right before IPO; now if we are heading toward another recession (or is it deflation?), where do you think the advertising dollars are going to go?
Google advertising business model is far superior than FB ’cause people who searched for items have high probability of buying the items they are searching for. Meanwhile, ad popping on FB while people just wanted to chat with their buddies are annoying, especially when those ad is designed with attention grasping “LOOK AT ME!” graphic artworks.
With such poor fundamental support (my opinion), I don’t see any counter-force movement to stop this waterfall price-action any time soon.
Therefore, albeit a bit late, I’m shorting FB by buying the July 28 Put options.
In case I’m wrong (which happen often), I will close my put option if price action exceeds yesterday high.
Good Hunting!
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nah u wrong my fb position is gonna fly, I got to buy more at 26.5 though
respect and cheers
or we may both be right 🙂
Only way this can happen is after I take profit; then you take your profit when it goes back up.
Since I’m bias to the downside, I’ll say good luck to you. 🙂
What does overpriced mean in a world where Amazon still commands a PE of 172? Sentiment is terrible on FB right now and the market is collapsing generally, so maybe this trade works. But I would justify it on those, not “valuation” per se. At some point sentiment will reverse and imo FB as the “pure play” will probably trade for a healthy PE premium to market. JMHO.
Over-price or under-price is a personal take of each investor/trader; it is the basic for taking a trade (long or short).
FB’s main revenues stream is advertising; so is CBS Corp. CBS Corp 2011 revenues was $14 Billion and MS stated that the new revenue forecast for FB is $4.85 billion for 2012; yet CBS market cap is a LOT less than FB.
Amazon invests heavily to build the infrastructure that will bring the prospect of increased revenues down the line; hence a sustainable “high” valuation. Unless FB is charging a subscription fee to users of FB, I don’t see how they can increase the advertising revenues better than the TV counterpart like CBS. And the rumor of FB mobile phone business model isn’t gonna cut it. Apple IOS and Google Android are two tough market barriers to break into.
It is during market collapse that the true valuation of a company become transparent; thus provide fuel for a further downdraft which is my thesis.
Thanks for sharing your opinion.
Added more FB put options since it took out Friday low as well as Thursday low.
Continued to add a bit more FB put options since it took out intra-day low of $26.57.
Closed out all my July FB put options and bought the Jan 2013 28 put options so I can have more time to ride it down.
My cost of the option premium will be my stop loss since I expect to make at least 3x my premium cost.
This way, I don’t need to manage this trade and have it distract me.
Today marks the 3rd day FB close with higher higher and a higher now. The high today exceeded the high of yesterday and almost best the high of 6/5; thus, I’ve no choice but to admit being wrong (by reason of TA) and took my tiny losses.
I will re-short (or buy put) if today low is taken out in the future.
No position now.