Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, social networking giant has received a distressing two-star ranking.
With that in mind, let's take a closer look at Facebook and see what CAPS investors are saying about the stock right now.
Menlo Park, Calif. (2004)
Internet software and services
Founder/Chairman/CEO Mark Zuckerberg
CFO David Ebersman
Trailing-12-Month Return on Equity
$9.5 billion / $2.3 billion
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 38% of the 1,807 members who have rated Facebook believe the stock will underperform the S&P 500 going forward.
Facebook's valuation rests on the company's huge user base, but the company still has to successfully monetize that user base. They may do that, but it won't be through advertising, which is the current plan. Google was successful with advertising because people use their service to search for things. Often, they are even actively searching for things to buy. People use Facebook to connect with people, and advertisements are seen as an annoyance during social time. Facebook may yet find a great way to monetize their platform, but they aren't anywhere close, and I believe investors will grow impatient before they get there.
After the world's most hyped IPO turned out to be a dud, many investors don't even want to think about shares of Facebook. But there are things every investor needs to know about this revolutionary company. The Motley Fool's newest premium research report shows that there's a lot more to Facebook than meets the eye. Read up on whether there is anything to "like" about it today to determine if Facebook deserves a place in your portfolio. Access your report by clicking here.
The article Why Facebook Shares Will Keep Fading originally appeared on Fool.com.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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