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Comment by nikcub | Hacker News Reader

Do you think taking the Facebook PE and comparing it to Apple is some major revelation that investors, or most people who read a newspaper, do not know? Every FB thread on HN has somebody pointing out PE, and then a thousand responses on what is wrong with that argument. So lets do it again.

The PE works out to be so high because there is a growth expectation from Facebook's one billion users. All that it says is that the market believes the chances that Facebook will be able to grow revenue, and in the future, profit, is very high.

PE is not an accurate indicator of the value of this stock. PE is used to compare mature yield stock, the type that all those Warren Buffet books talk about. With Facebook still being a young company the numbers to track are revenue growth and price/revenue.

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Just to pick a nit. To date Facebook's P/E is high because Facebook said so. Facebook's value has never been set by an open market until about 3 or 4 hours ago.

Its P/E isn't mean to be an indicator of value, its shows the markets expectations of growth. And I think a lot of people are interested to see if the "market"'s expectations are inline with their own - and to that end P/E is great.

No, Facebook's P/E has been high because people having been willing to buy the stock at a high price. Facebook can't dictate what price other people are willing to pay. It's always been set by the market, from day 1.

I disagree - though I concede its a semantic argument (and I wasn't referring to its private sales - which is valid), but the $38 price was dictated by FB and propped up (artificially) by MS it was not market set. I think that's reinforced by the drop we've seen today when the underwriters aren't there to prop the price up.

And what's the P/E at the $33 price? OK then.

>Just to pick a nit. To date Facebook's P/E is high because Facebook said so. Facebook's value has never been set by an open market until about 3 or 4 hours ago.

Not an open market, no, but a market nonetheless. Anytime a company takes a funding round, whether from a single incubator or a dozen VCs, the transaction implicitly prices the company pursuant to growth expectations. (And that's not even mentioning Facebook's heavy trading in SecondMarket.) Just because a market is restricted and low-volume doesn't mean it doesn't exist; any time a transaction occurs, you'll find a market behind it.

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