Is It Safe To Buy Facebook?

| About: Facebook (FB)

Over 2012 Facebook (NASDAQ:FB) has been the company many Seeking Alpha readers have loved to hate.

Since its failed IPO that delivered a 50% haircut to early buyers by last month, Facebook has been recovering. The expiration of lock-ups on its remaining shares this week was anticipated by traders, who brought the stock to new lows, but then (surprise) the price rose over the last few days, as the lock-ups expired, and the stock now stands at $21.33.

So is it time to step in? Let's look at both the bullish and bearish cases.

The Bullish Case

Facebook has been smart on the technology side. It was built quickly as an open source cloud application, and it has kept to that, only investing in its own cloud hardware and data centers as revenues permitted.

The use of open source, and aggressive cloud build-out, gives Facebook crucial advantages among developers, who can take advantage of the same tools and economics that made Facebook itself grow up quickly.

Facebook also has a mobile strategy. The tie-up with Apple is not formalized, but moving quickly with a native iOS app of decent quality was a smart move. The purchase of Instagram looks like a smart move. It hasn't ignored Android. Analysts who have taken a look at Facebook's mobile plays say it has a solid monetization strategy.

The Bearish Case

Facebook was created for college students. College students grow up. And what was hot when you were college is guaranteed to be not as hot when your younger sister goes there. Google Plus is turning out to be a fierce competitor in the older demographics. And there is always the chance that this "social" thing was just a fad.

Facebook faces increased security costs to fight fake accounts and likes. Some of its monetization efforts are being fiercely resisted by people like Mark Cuban, who is never shy in giving his opinion.

I have said before that I would not consider buying Facebook until January. The lock-ups were only one reason. I want to see another quarter's numbers, and I want to crunch them, looking at both current and forward PE multiples, and growth rates, before considering putting money to work there. Doesn't mean I won't, but it does mean I'm going to measure Facebook as I would any other mature, industrial company. Its days of shock-and-awe are over.

Facebook is grown up, and it needs to be evaluated on that basis. And at a current PE of 200, it's way too pricey for me. I said before I might like it at $13, and I maintain that price target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.