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Firstly, Facebook's growth is in rapid decline. The most recent three quarters recorded growth of 104%, 55% and 45% respectively. This compares very unfavourably with other recent IPOs, in particular, Google.
Next, we see that Facebook's Price/Earnings ratio is way out of kilter with any other tech company. An Industrial stock (pick any large oil company as a random example) trades with a PE of around 10 - 15x. In other words, their market capitalisation is around 10 - 15 times their yearly earnings. Apple's PE is similar to this, Google's is somewhat higher at 20x.
Facebook earned about $1B in 2011, making the PE calculation easy. If they match Apple's PE, they should be worth about $13B, but if we use Google's PE, that value rises to around $20B.
Adding a degree of generosity, we might say that both Apple and Google are relatively stable companies with limited growth potential and thus their PE is lower than a high-growth company might be. But even if we jack the PE up to 50x, we are still left with a $50B company. Can anyone justify a PE of 100 (to support the $100B valuation)?
In addition, a straw-poll at a well-known share trading site found that just 12% of respondents wanted to buy as soon as possible; 76% said they'd either wait a while or stay right away from it.
So, here's what I think will happen.
