Don’t laugh because one of the daily volume leaders, Bank of America Corp. (NYSE: BAC) stock price dropped below $5 a share back in December of last year to $4.91. So, with no juice on the IPO debut and a drop in share price on the first true trading session, could Facebook Inc. (Nasdaq: FB) stock wind up on day traders list of penny stocks to watch? It actually would make more sense from a P/E point of view.
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Let’s Do the Math
FB stock traded 168.31 million shares on Monday before closing down $4.20, -10.99%, at $34.03. Shares in Facebook traded even lower in after hours trading to drop an additional 25 cents, -0.73%, to $33.78 which further supports this theory. After this first day of trading since the IPO debut, FB stock currently trades at a Price to Earnings (P/E) ratio of 78.59.
So, how does FB stock compare to some of the other stock market giants and famous names? Here is a list of 10 stocks to compare their P/E ratio to Facebook’s:
7.22 : JPMorgan Chase & Co (JPM)
7.31: Citigroup, Inc. (C)
10.83: Wells Fargo & Co. (WFC)
10.90: Microsoft Corp. (MSFT)
11.06: Intel Corp. (INTC)
12.28: Cisco Systems Inc. (CSCO)
15.81: General Electric Co. (GE)
17.77: Yahoo! Inc. (YHOO)
17.90: Lowe’s Companies Inc. (LOW)
18.61: Google Inc. (GOOG)
With Facebook’s current EPS reported as 0.43, Facebook would have a P/E ratio of 2.33, higher than Ford Motor Co. (F) 2.16, if FB stock was $1. It would have a P/E ratio of 4.65 if FB stock was $2, just slightly better than pharmaceutical giant Astrazeneca (4.99), energy giant Royal Dutch Shell (4.98), and BP PLC (4.95).
At $3, Facebook would have a P/E ratio of 6.98, better than any of the listed companies above. at $3.50, FB stock would fall between Citigroup and Wells Fargo at 8.14. At $4.50 per share, FB still trades at a P/E ratio of 10.47. And finally, at the SEC defined level of a penny stock, at $5, Facebook would have a P/E/ ratio of 11.63, right between Microsoft and Intel.
If Facebook can’t maintain their EPS, the P/E ratio is only going to get higher. They are already trading at a ridiculous Price/Sales of 25.91 and a Price/Book (mrq) of 11.08.
So, what to think of this? It’s the ultimate Revenge of the Nerds with Zuckerberg humiliating investors and taking their money in the process. The worst part is that investors are still lining up for more. Everything from Facebook being “too big to fail or succeed” to warnings that FB stock could “crater” if Facebook can’t grow their revenues 41% annually for the next five years are all signs how Zuckerberg’s Facebook could be Skynet and eventually bring down the global economy.
Bottom Line: Options are due out next week for FB and puts will surely be gobbled up in hopes that the price of the stock continues to drop considering the ridiculous P/E ratio it currently trades at. Can you compare Facebook with these companies and what they provide as a service or product? Whether its galvanized nuts and bolts, barf bags for travel or the ability to share your pictures and thoughts over the internet while watering virtual gardens, revenues are revenues. If Facebook can’t increase revenues, be prepared for Skynet and FB stock to become one of the penny stocks to day trade.
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