Is Facebook's upcoming IPO (initial public offering on the stock market) properly priced? The company's price will be about 99x that of their earnings.
I think that this is a very high but justified valuation of the company. Many lines have been drawn between Google's IPO and the upcoming offering of Facebook shares on the market, Google's initial P/E ratio (price of the company to the earnings that they have, Facebook's would be 99) was 125. Both websites are constantly used by the public, almost everyone uses both Google and Facebook every single day. When you buy a company, you're paying for their future earnings as well; investors clearly believe that Facebook is going to start pulling in record breaking profits soon, as the company is already being valued at about $100B. Google went public before they started selling their androids, before any hype about Google Glasses came out, all they had was a search engine. Facebook is quite similar in this was that their profits all come from their website, perhaps investors are waiting for Facebook to join the phone market, or to start creating something that you can put in your pocket.
Many investors are excited to see what Facebook can do, as am I, but we need to see some really large profits if Facebook hopes for the price of their company to increase much.
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