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Facebook – Buy, Sell, Hold

21 May 2012 5 Comments

fbWhat do you think about Facebook stock?

Are you an optimist on FB telling your friends it’s a BUY, or are you netural?  Do you think it’s time for anyone who got in to sell now and take the loss?

The IPO Friday started with an opening of $38 and jumped to over $42 for the high.  The second day of trading the stock plummeted to a close of $34.03.  Currently at The Street.com there are two ‘Strong Buy’ recommendations. (Not sure who put those in there, because it doesn’t have a link to the analysts.)  Most financial sites I’ve researched don’t have analyst recommendations yet.

However, this Washington Post article states that it’s possible the stock will double or even triple over the next five years.  I’ll agree with this.  Although the initial reaction to the stock has come with doubts based on the drop in the stock price, it has huge potential.  Yes, there is still a big upside coming for this stock in my opinion.

About a month ago one of my investment banker friends sent me an email asking if I wanted in on the pre-IPO purchase of the stock.  The offer was to buy around $38 but you were locked in with the investment company to hold for six months.  My first reaction was not to buy just because I didn’t think the stock would do much and second because I had to sit on my money for that long with someone else controlling it.  After telling my friend, “I’m out”, I had second thoughts.  My doubts about Facebook doing much was based on personal opinion.  I’m online all day, typically 10-12 hours.  So I visit a lot of sites and see myself as someone with a handle on the pulse of online activity.  At the same time I have a bias toward certain sites.  I found my personal opinion was getting in the way of looking at the investment as just that an investment.

So I sat back and started to write down the pluses and minuses of the company.  The biggest plus that switched my opinion from neutral to buy was the conversation I had a few online marketers a couple months ago.  These guys spend a lot of money advertising online and have made a lot of money over the years with their websites.  They had recently tested Facebook ads to drive traffic and found that it was so successful, they cut their Adwords accounts with Google and moved the money to Facebook.  If advertisers are this successful with the ads just in the infancy of the program, it can only get better, which means it’s going to get bigger as well.

That’s when I called my broker and placed the buy order for Friday.  I got in but at a price of $40.  As of the second day of trading I’m down 15%, but am I worried.  Not a bit.  I know this stock has a long way to go and the company has huge potential.  I remember several years ago, doing the same analysis with Google when it went public.  Even though I came to the same conclusion – “BUY”, I never did.  This time I’m in.

So what do you think?  Do you buy, what price?  Are you selling, holding or keeping out?  Where do you see the stock in 90 days and 1 year? Let us know the comments.

5 Comments »

  • Brent said:

    Hmm…also bought in (at $38). Believe, like you, that Facebook has what it takes to make a lot of money and it's investors a few bucks. Lot's of bad press right now, but lost in the mayhem is the reality of how Facebook changed the world. That's a big statement, but it's true. The world is a different place because of Mark Z. and his crew. I'm sticking with them, and hoping their business strategy merges eventually with their undeniable social strategy…and…I'm setting a Stop Loss. :) If it's gonna sink before it rises, better to cut your losses and jump in at the bottom (or lower than you sell). Or, just wait 'til it shows signs of repair and pop back in. Don't lose your shirt on this, (even for a little while). There will be lots of time to decide to buy, and it will be a good purchase then too. No need to keep watching your money disappear (if that's the direction it's going first). All the same…cheering hard for Facebook!

  • CMBSer said:

    I would thunk that "short" should be an option.

  • 20smoney said:

    Good points Brent. Lots to consider with this stock. Today it continues to drop. Pretty risky to play a stock on the opening IPO day.

  • Jake said:

    I held out…valuation seems a bit too high, and not sure how fast they're growning relative to prior growth.

  • Ryan said:

    Bought in at $36 and change. Holding onto FB for now. I'm looking forward to the upturn we are going to see in America. Remember what the wealthy banker and politician Baron Rothschild said? The best time to buy is when there is "blood in the streets, markets have fallen drastically, and investor sentiment is extremely negative." That was back in 1885. Times don't change sound fundamentals, as that pretty much sums up the world markets right now. I agree, in 5 years we will all be glad we bought in at such low pricing. Try to have fun with it everyone, at least we're not sitting on the bench! Enjoy the rally today!