I will probably never ever buy Facebook shares. Well never say never, but the case is that from dividend growth perspective and long term savings Facebook is probably too risky investment which is neither paying dividend nor buying back shares. Also company spends lots of money on acquisitions. Is it really worth?
Well look at share price performance. I remember when there was an IPO of Facebook and company was valued at around P/E = 100. Since that time share is up by more than 200% and it seems that prospects are still good. Mark Zuckerberg and his team are doing an awesome work.
Although penetration of Facebook is very high company is able to increase customer base (also through acquisitions).
Which translates into higher revenues (both due to more customers and higher ARPU):
The only problem is that most of revenues comes from advertising. With changing world, you know this all big data stuff, targeted marketing etc. I think that in midterm there might be a pressure for advertising revenues. On the other hand people will always use advertisements and only Facebook (and Google) can offer such high amount of potential users.
Valuation is very demanding with P/E16 around 48 and EV/EBITDA16 = 21…. too much for me.
Summing up, Facebook is a great success story, but I am not really sure whether it is a good long term investment for me. Valuation is demanding and company is not paying dividends so for me it is not a suitable investment.
Disclosure – FB no position