Has Facebook stock run out of steam? After last year’s tremendous tear, more and more investors are arguing that it has. This year has certainly not been kind to Facebook or many of last year’s strong momentum stocks, although the social network’s stock has recovered much of the value it lost after early February amid the broader market sell-off. Also looking at it on a year to date basis, Facebook Inc (NASDAQ:FB) stock is on the plus side, having gained nearly 6%, which again places it ahead of many other stocks.

The Opportunity Cost Of Owning Facebook Inc (FB) Stock

The “opportunity cost” of owning Facebook (FB) stock

In a post on Amigo Bulls, one investor argues the bear case for Facebook stock, basing much of his thesis on the “opportunity cost” related to owning shares. He noted that the social network’s shares have outperformed the S&P 500 over the last two years, climbing 100% over this time. The stock quickly became a favorite for bulls favoring tech stocks as it gained prominence as part of FANG (Facebook, Amazon, Netflix and Google), which were considered to be the tech stocks to own in 2015.

Harshal Patel defines opportunity cost as a comparison between Facebook Inc (NASDAQ:FB)’s market capitalization, which was $310 billion as of March 11, and other potential investments to see what the same amount of money could buy. In this particular case, he noted that $310 billion could buy Kroger, Kimberly-Clark, Clorox, T. Rowe Price, Ford, Goldman Sachs, Phillips 66, and Deere & Co., and the investor would still have $1 billion in cash left.

To determine whether all of Facebook or all of the listed companies would be a better investment, he asks rhetorically, “Which option has a moat and is likely to over perform for years to come?”

Tech options other than Facebook (FB) stock

He adds that based on their market caps on March 11, investors could buy all of Amazon and Netflix as well and still have some cash left over. He seems to think these two investments would also be better to own than Facebook.

One reason is because he thinks the social network could lose its status as the biggest and most popular in the world to SnapChat or another new social network, noting that MySpace and others have done this in the past. Amazon, on the other hand, he said has a large oat in retail with its warehouses and cloud services.” Also Netflix has “it’s [sic] award-winning original shows and licensing deals with TV and movie studios.

Concerns about income generation

This concern finally gets down to an argument some investors might be a little more willing to take into serious consideration. However, others may still find plenty of places to poke holes into these arguments.

Patel points out that Facebook Inc (NASDAQ:FB) is the eighth biggest public company in the world, and it earned $3.6 billion in earnings last year, while the long list of companies he gave above earned more than $24 billion in net income. Further, the list of companies pays dividends, while Facebook doesn’t. In the long term, dividend-paying companies do tend to make better investments, speaking on a very generalized basis.

Of course bulls argue that Facebook Inc (NASDAQ:FB) is a growth stock, so net income doesn’t matter. Patel noted that Apple is actually increasing its profits faster than Facebook is but it now has an earnings multiple of 10 and is no longer being treated like a growth stock. In other words, growth stocks won’t remain growth stocks forever. So while Facebook’s current multiple is 85, Patel notes that the multiple will likely contract at some point to come in line with Apple’s 10 or Alphabet’s 34 times. This is actually an important point for long-term investors to consider.

Will Facebook (FB) keep diluting its stock?

And then there’s the fact that Facebook has been making quite sizable acquisitions and doles out some new shares of its stock as part of the payment. It’s nothing new for tech companies to rely on stock-based compensation for employees either, and Facebook is the same in this area, which means dilution is practically a way of life. Patel notes that the number of outstanding shares of Facebook has skyrocketed since it went public nearly four years ago.

Facebook Inc (NASDAQ:FB) stock edged higher during regular trading hours on Wednesday, climbing by as much as 0.47% to $111.19 per share.