I mentioned I’d talk about another social media stock NOT to buy. Very simple, it’s Linked In.
Before people start going off on me, let me get something straight. I love LinkedIn’s business model. It provides a great service, possibly more useful than Facebook. Also unlike Facebook, they have premium accounts which people in business will pay for (I’m thinking recruiters and people in HR). While it is not as social or developed as Facebook, it does provide some services and fills a gap that FB lacks.
On the flip side, it is trading at 600x earnings. Yeah. I know with regards to technology companies a lot of people say you have to through out the P/E ratio but when something is trading that high compared to earnings, you have to wonder whether its worth it. While FB is somewhere around 65-70x earnings, LI is 9 to 10 times that. Yikes.
I have this shirt given to me from Pink Sheets from when I was a market maker and used their product. On the back of it in big letters it says “CAVEAT EMPTOR.” So just a quick Latin lesson, it means “Buyer beware.” Here’s a fun cartoon about it found:
Now LinkedIn is a great company, just not at the prices its trading at. When the Price Earnings, Price Book, Price to sales, and Price to Cash Flow ratios are all out of this solar system, I stay away until it comes back to Earth. Still, it’s a company to watch.
I promise to write some things that are uplifting, particularly about something to actually BUY.
Image comes from:
The Bunny System