Facebook shares: $38, Google shares: $623, Apple Shares: $530, Amazon Shares: $218?
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Is today a good day to buy Facebook Shares? Some commentators are saying Facebook shares could fall but if you compare Facebook shares to the other tech giants shares it looks like shares could climb up pretty darn high.(10x at least?) Or am I missing something? All comments & answers welcome. Thanks in advance.
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Answer:
Things don't work like that. Each company is unique and has different future cash-flows. Being a successful company now does not guarantee future success and higher stock price. Think of Microsoft, although being one of the most successful company in the world with great financials, its stock price is hanging in $ 20-30 range for years.
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Other answers
"Or am I missing something?" You are missing a lot. Stock prices rise and fall, and there's no guarantee, except this. The only people who are guaranteed to make money with the Facebook IPO, and the underwriters and the top 100 Facebook employees.
You are missing the market capitalization. Even if Facebook IPO launches at 1$, it could be overpriced, because then Facebook would be floating more number of shares in the market than they are floating at 38$.
All of the companies listed besides Facebook are offering products/services that generate high profit margins and have longterm growth potential in the form of new products and services. Facebook's only source of income is ad revenue. Other than that they're merely an updated myspace. As it stands, Facebook will not grow into a $100/share company. They'll fade into obscurity as an outgrown fad well before then. So if you do decide to buy shares, don't do so expecting it climb by a factor of 10. Maybe $50 or $60, but not $100+.
At this price a company not producing hardware could be well over priced. There are many people like me who have no interest in a Facebook account therefore any advertising is wasted.
What is the number of shares? What is the financial forecast for the next 6 months/1 year/3 years?
You have fallen into a common trap. If you take a $100 bill and cut it into 10 pieces you`ll have 10 times more pieces (or shares ) than someone with an uncut $100 bill, with each piece worth $10(price) but still only $100 (value). It`s the same with companies. While two may have the same value (mkt cap) , the price of each share will depend on how many shares (or pieces ) each company is divided , the more shares then the "cheaper" the price appears to the uninitiated.
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