I've certainly had more than my share of bad trades but after going on and on and on about Facebook (FB) being incredibly valuable, I did end up buying. No, I did not buy right as the stock went public, that is a mistake that I've promised myself to never again repeat. But I did end up buying the stock at $19.99. A few of my friends said it was time. Facebook was seen as this massive failure and if I thought it was a buy at its IPO price, I'd be crazy not to buy it at half the price right?
Yes, I Did Walk The Walk
I did end up buying Facebook despite all of the incredible bad press. It's always interesting to me when a stock starts to have so many haters. These days, although it's not quite as bad, Apple (AAPL) seems to have its fair share. I'm obviously a big Apple believer. Anyway, back to the point, if you remember well, my main argument about Facebook was the number of different things it could do with its platform and user base.
Mobile = Death Of Facebook?
This argument drove me insane. I'm not kidding. How can it be seen as a bad thing that instead of going to Facebook for a few minutes from their desktop, they are now going several times more from their smartphones. Seriously! If you look at earnings calls of most web companies, you will see that this is a major concern. I'm not saying that it's not a problem for some players but I never feared it was a problem for Facebook. Was it a problem for its current sidebar ad model? Yes. Even that is overvalued. Facebook did start displaying ads in the news feed which DO appear on mobile devices. Problem solved?
It's Not Just Advertising!
Facebook was never going to be valued based on the number of sidebar ads it can sell anyway. If that is how you are valuing Facebook, then yes, maybe the stock is still massively overvalued. There are many different things that Facebook can do with its user base though. It did start "Facebook gifts" recently. I'm unsure how well it's working but with initiatives like Facebook Gifts and Facebook Offers, the company is increasingly seeing transactions take place through its platform which is perfect. If Facebook can make life easier for users, merchants and take money for that service, that would be perfect.
There are also other initiatives. One possibility that looks increasingly likely is related to advertising but somewhat different. Google (GOOG) operates an advertising service named Google adsense. Basically, it sells ads for other websites through all of its current advertisers. It makes billions of dollars doing so. It is looking increasingly likely that Facebook will launch a competing service which would also boost earnings.
There are also many different things being discussed…So yes, as you can see I'm still very much optimistic on my Facebook investment.
It's Not Too Late
The goal is never to buy at the bottom.. you will end up staying on the sidelines always trying to buy for cheaper. The question remains… is stock XYZ a bargain at this price? To me that question is: "How much upside to I get and what is the downside?". I personally think Facebook will likely go much higher. If you're not convinced yet, I read a very interesting piece about Facebook's eventual demise on TechCrunch, which will happen at some point, but probably not anytime soon. I agree with most points discussed.
Anyone else a holder of Facebook? Or thinking about it?
Disclosure: Long Facebook (FB)