1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/17836/barrons-says-theres-bubble-trouble/

Barron’s says there’s “Bubble Trouble”

July 23, 2011 by

Michael Santoli writes for Barron’s this week,

Based on Google’s median price-to-sales ratio, the eight social-networking companies are between 20% and 100% overvalued—even assuming that some can grow into dominant franchises like Google.

This represents, if not a bubble, a bubble-in-waiting, but only because just a sliver of the sector is publicly traded. Once a broad set of investors gets its hands on these stocks, the companies are likely to attain vastly higher values than those currently anticipated and discussed.

Santoli points out that Google stock is relatively unloved these days at 17 times earnings and 7 times revenue.  Amazon.com trades at 2 times revenue.

While I happily listen to Pandora (the free version) as I write this, the company’s stock trades at 16 times expected 2011 revenue.

Santoli makes an exception for Facebook, writing that, “the broad and deep economy of applications for Facebook, and the massive “installed base” of users, make it hard to bet too strenuously against huge growth projections for the company.”

 

 

{ 3 comments }

Franklin July 23, 2011 at 7:15 pm

Firstly, the headline: “Barron’s says there’s ‘Bubble Trouble.’”
Barron’s is not saying it. Michael Santoli is saying it.

Secondly, “Santoli makes an exception for Facebook, writing that, ‘the broad applications…and the massive ‘installed base’ of users, make it hard to bet too strenuously against huge growth projections for the company.”

So then, I s’pose the social networking stocks are overvalued unless you can creatively rationalize some preferred factor which justifies an exception.
Feh, animal spririts kind of analysis.

And they wonder why their prognostication is as credible as the traveling carnie soothsayer.

David C July 23, 2011 at 11:44 pm

Yeah, they ain’t seen nothing till they’ve seen the US Treasuries market.

El Tonno July 24, 2011 at 6:21 am

“the broad and deep economy of applications for Facebook, and the massive ‘installed base’ of users, make it hard to bet too strenuously against huge growth projections for the company.”

Hmmm….

http://forums.theregister.co.uk/forum/1/2011/07/09/facebook_trillion_dollar_valuation/

Comments on this entry are closed.

Previous post:

Next post: