Facebook Stock During a Recession

I want to add a thought to my Facebook commentary that I posted earlier this week. Part of the reason why Facebook has seen its price climb from a low of $17.50 in 2012 to $97.54 now is that overall profits have climbed from $1.25 billion to almost $3 billion over that time frame. When people see the five-year charts of Facebook reporting 28% annual profit growth, they use it to talk themselves into paying a ridiculous valuation for the stock.

But what often goes unnoticed is this: Facebook makes most of its money from advertising revenues, and the 2010-2015 measuring period only captures an improving economy in which companies increased the amount of money earmarked for ad companies.

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