Is Facebook a Buy Yet?http://www.fool.com/investing/general/2012/08/21/is-facebook-a-buy-yet.aspx Anders Bylund
August 21, 2012
Three months later, the stock has fallen another 30%. Facebook has taken a 50% haircut since hitting the public markets.
Maybe it's time to reconsider. Is Facebook a buy at these discounted prices?
Many investors would take one look at the P/E ratio and run away, convinced that no company is worth 67 times trailing earnings or 10 times sales. But that's a simplistic knee-jerk reaction based on one of the quickest, but weakest, valuation tools available. The same P/E-centric investors also missed out on Amazon.com (Nasdaq: AMZN ) and its terrific growth story, because that stock's P/E ratio rarely dips below 50:
Amazon keeps its earnings low on purpose. This keeps taxes low, while allowing the company to focus its cash use on rapid growth opportunities. I don't see investors complaining about the 1,500% returns this strategy has produced over the last decade. Could Facebook be onto s similar low-profit strategy with a huge long-term payoff?
Word on the Street
But there's no consistent bull story to lean on. Several firms like Facebook's improving revenue muscle. Wells Fargo, for one, sees "multiple avenues for sustained revenue growth in excess of 25-35% for the coming years as advertising dollars shift to online, social ad spend gar