Facebook shares are due to go public in coming weeks as one of the largest Tech IPOs of all time raising as much as $10billion and a market valuation close to $100billion.

It currently generates around $3.7billion in sales and just under $1billion in profit.

At a $100billion valuation which is the price private share trades have been taking place, that’s a massive 100 times earnings multiple compared to 13 times average for the stock market.

However it isn’t unusual for a fast growing internet company to be valued so high.

I’ll be applying the Warren Buffet rules of investing when considering whether to buy Facebook shares or not, which will come down to a judgement call on whether it is overvalued or under valued.

With 900 million users and likely to hit 1 billion it shows impressive growth.

However my concern is that’s it business model isn’t yet proven other than advertising however which is nowhere near Google size and profitability.

Ie. Google listed at $US85 a share at only a $24billion valuation and many thought it was overvalued yet has traded as high as $600 a share since.

So those who bought Google in their IPO did very well.

So have those in other internet stocks like LinkedIn etc.

The other challenge for Facebook is more and more of us access Facebook and the internet via smart phones not computers.

And they are yet to figure out how to profit from this as ads on Facebook when accessing via a computer is one thing but via a smartphone there is less room and less acceptance of advertising.

Personally I think in short term Facebook is overvalued as many investors who will be exiting at the IPO are the ones making the big dollars.

However it will not necessarily trade rationally due to the fact so many people want to own the shares so demand no doubt will drive it above what fundamentals would suggest.

Long term? Who knows.

Facebook has massive potential so it could see major growth.

However it needs to justify its already sky high valuation.

Personally I’m more bullish on Stocks like Apple and Google.

Already proven business models and both huge cash machines that will continue to grow.

In fact I’ve just negotiated for 21st Century Members to be able to borrow up to a $1million (sometimes more) to buy stock like Apple or even top Australian stocks like banks, Telstra, BHP etc. Clients can now borrow 2% to buy Facebook shares too.

Approved within 24 to 48 hours

And with interest rates from US Banks between 1 and 2% interest pa.

A simple high yielding play is what many savvy investors are using this for.

Ie. a 7% dividend yield stock and paying say 1.5% interest pa becomes an attractive play.

Email enquiries@21stca.com.au for details to be sent to you by our licensed Broking partners.

To hear the Facebook story first-hand don’t forget to attend this year’s 21st Century Financial Education Summit Sept 15th -17th as for the first time a Facebook co-founder will speak in Australia.

Visit http://www.FinancialEduationSummit.com

To learn the key Warren Buffet Rules of investing attend a 4 day Education for Life Event or become a 21st Century Member

Www.21stCenturyEducation.com.au

Jamie McIntyre is the founder of the 21st Century Group of companies and CEO of 21st Century Education. He is also bestselling author, successful entrepreneur, investor, sought after success coach, internationally renowned speaker and world-leading educator. www.jamiemcintyre.com

Jamie McIntyre is the founder of the 21st Century Group of companies and CEO of 21st Century Education. He is also bestselling author, successful entrepreneur, investor, sought after success coach, internationally renowned speaker and world-leading educator. http://www.jamiemcintyre.com

Author Bio: Jamie McIntyre is the founder of the 21st Century Group of companies and CEO of 21st Century Education. He is also bestselling author, successful entrepreneur, investor, sought after success coach, internationally renowned speaker and world-leading educator. www.jamiemcintyre.com

Category: Business
Keywords: 21st century education,Blog,facebook,finance,IPO,loan,News,public,shares,stock,trade,wealth,worth