Aswath Damodaran On Facebook Woes

Aswath Damodaran On Facebook Woes

Aswath Damodaran in an interview with CNBC, aired on July 26, 2018; talks about Facebook.

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Aswath Damodaran On Facebook


About this the guidance from Facebook all along is to short the stock of Venus. It seemed like it got everybody by surprise.

The reason I said we should have known is Facebook has been telegraphing for almost the entire year. Two things. One is that they're shifting their focus away from news to friends and that's part of an effect on advertising. The second is that they're going to hire thousands of people to take care of privacy. Those people don't work for free. So what you saw yesterday was Facebook was in a sense not unexpected. Their margins decreased the user numbers. The growth was low. But I think a big big number to watch is user intensity the of the time that people spend on Facebook that we don't know yet because after perhaps one of the worst quarters in terms of PR that a companies had. I was surprised that the user numbers actually went down. So to me what what you saw with Facebook yesterday was a reflection of what's been going on all year and what the market did. And this was surprising to me is after April the market seemed to have forgotten all about the privacy scandal and gone back to business as usual. And I think they got a surprise yesterday that they did.

OK so you say undervalued on Facebook Amazon just checking out its earnings reports about 3 percent of hours.

Where do you stand on this from a valuation perspective Amazon terrifies me as a company simply because you find it overvalued but you cannot bet against this because this is a disruption machine. I'm not even sure what business the companies in anymore. It's a platform that can be used pretty much disrupt any business and that's what's being priced. I mean remember yesterday we punish Facebook for its margins going from 47 to 44 percent. Today we're rewarding Amazon for its margins going from 6 percent to 8 percent. So we're using different sets of rules and expectations. These companies put in a sense. Amazon is on its way up in terms of margins and Facebook is on its way down.

OK as he says worth 1019. Fast forward a little bit. We're running out of time. Tesla you say it's worth 190.

So overvalues they are desperate to is the danger of investing in a personality rather than a company. I think that I mean we can talk about how great the potential here is but this is a company that where the story doesn't make sense because what the company is saying about what it needs in terms of future capital is at odds as what it needs to do to become a great company. So it's almost like the company has to make up its mind as to what it needs doing in this case when we say company Elan Musk. Professor thanks so much for joining us. Always great to get your analysis. Thank you.

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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