Facebook officially goes public tomorrow, with an initial price of $38 per share. That price has largely been set due to initial demand and absolutely nothing to do with any form of rational thinking.
Yes, there are going to be some very wealthy people tomorrow both on paper and in their pockets. Those that are wealthy on paper are those that have a lot of Facebook shares and those that have their pockets overflowing with money are those that sell some or all of their shares tomorrow.
Here is the problem. Facebook pulled in only about $1 billion in revenue last year. That is no number to sneeze at, but with their IPO price of $38 per share, that values the company at about $104 billion dollars. Is their P/E ratio really worth being at 104?
Google's P/E ratio is 18.9. Apple's is 12.9. Even non-tech giants Johnson & Johnson and General Electric hang out at 17.4 and 15.3 respectfully. Sure, those companies have been public companies for much longer, and have even had significantly higher P/E ratios then they do now (especially Google and Apple).
So yes, Facebook's stock price will probably even rise tomorrow and perhaps into the next week as people trip over themselves just to get a piece of the action.
But the price will fall. It has to. Unless Facebook comes up with an amazing new revenue stream over the next several quarters. Once the P/E comes under 25 or so, it would be worth looking into owning.
That is, unless the company is one of so many other tech companies who were the hottest thing going and is no more - and is beginning to be passed by some new kid on the block.
Come tomorrow, take a pass on Facebook. Wait until their revenues come up, or the stock price falls then jump in. One or both of those will happen, and that, you can take to the bank.
Showing posts with label Apple. Show all posts
Showing posts with label Apple. Show all posts
Thursday, May 17, 2012
Wednesday, February 8, 2012
Come on Apple!
You can do better than this.
Reports from the New York Times have shown awful work conditions at Foxconn, one of Apple's major suppliers in China.
Apple is sitting on $100 billion. Just sitting there. Collecting nothing but interest.
While they sit around and think about what to do with it, perhaps they can invest 0.001 percent in upgrading their supply chain. $100 million could go a long way to fixing these problems.
Firstly, it is impossible to know what the agreement is like between Foxconn and Apple. But I am sure there are some provisions within the contract that mentions working conditions. If not, Apple has all of the leverage in the world to make those changes immediately.
Look, I have no problem with Apple outsourcing their work to China or wherever they choose to do so to maximize their business opportunities. But the public relations hit that Apple is taking is not going to be worth it in the long run, unless they make some sweeping changes.
They can immediately fire Foxconn and go with other suppliers in China or some other location. This would be the most dramatic change and likely erase the negative press they are getting. Obviously there are huge logistical challenges with this, especially with significant supply chain disruptions, but they may be able to pull it off.
What they will probably do is force Foxconn to make changes to how they treat their employees. It will likely cost Apple money in increased enforcement of working conditions and wages, but it would just be the right thing to do.
The company won't miss the money, they can make the lives of thousands of workers better and improve their image with customers and potential customers around the world. Step up Apple. Do the right thing.
Reports from the New York Times have shown awful work conditions at Foxconn, one of Apple's major suppliers in China.
Apple is sitting on $100 billion. Just sitting there. Collecting nothing but interest.
While they sit around and think about what to do with it, perhaps they can invest 0.001 percent in upgrading their supply chain. $100 million could go a long way to fixing these problems.
Firstly, it is impossible to know what the agreement is like between Foxconn and Apple. But I am sure there are some provisions within the contract that mentions working conditions. If not, Apple has all of the leverage in the world to make those changes immediately.
Look, I have no problem with Apple outsourcing their work to China or wherever they choose to do so to maximize their business opportunities. But the public relations hit that Apple is taking is not going to be worth it in the long run, unless they make some sweeping changes.
They can immediately fire Foxconn and go with other suppliers in China or some other location. This would be the most dramatic change and likely erase the negative press they are getting. Obviously there are huge logistical challenges with this, especially with significant supply chain disruptions, but they may be able to pull it off.
What they will probably do is force Foxconn to make changes to how they treat their employees. It will likely cost Apple money in increased enforcement of working conditions and wages, but it would just be the right thing to do.
The company won't miss the money, they can make the lives of thousands of workers better and improve their image with customers and potential customers around the world. Step up Apple. Do the right thing.
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