You'd be gambling enough already if you bought FB stock at 20x earnings (the tech norm for well-established companies), let alone at 100x.
At 20x, you'd be speculating on FB's ability to sustain its current earnings power in an increasingly competitive and verticalized space. That's a tough proposition, particularly since social graphs are not as much of a competitive moat as people thought (Orkut for example had at some point virtually the entire online population of Brazil engaged with it, virtually none now), and everybody and their mother is investing in a new social network for a different vertical.
Of course, it is entirely possible that FB will not only maintain its market position, but also increase its earnings power five-fold or whatever. In that scenario, they would have squashed most other vertical social networks and found a sustainable business model (they haven't really yet, see [1]).
Again, not impossible, but bear in mind what assumptions the current valuation implies. It's not surprising to see the market re-adjust its valuation after the IPO craze.
You'd be gambling enough already if you bought FB stock at 20x earnings (the tech norm for well-established companies), let alone at 100x.
At 20x, you'd be speculating on FB's ability to sustain its current earnings power in an increasingly competitive and verticalized space. That's a tough proposition, particularly since social graphs are not as much of a competitive moat as people thought (Orkut for example had at some point virtually the entire online population of Brazil engaged with it, virtually none now), and everybody and their mother is investing in a new social network for a different vertical.
Of course, it is entirely possible that FB will not only maintain its market position, but also increase its earnings power five-fold or whatever. In that scenario, they would have squashed most other vertical social networks and found a sustainable business model (they haven't really yet, see [1]).
Again, not impossible, but bear in mind what assumptions the current valuation implies. It's not surprising to see the market re-adjust its valuation after the IPO craze.
[1] http://cdixon.org/2012/05/15/facebooks-business-model/