Facebook Inc (FB): Reasons To Stay Away From The Stock

sell these etfsDiane Alter: Facebook Inc (NASDAQ:FB) stock closed over $39 for the first time ever Monday, but the gains were short-lived. In mid-morning trading Tuesday, FB shares slipped more than 2% to $37.94.

Nonetheless, Monday’s milestone, which took a long 14 months to achieve, left many investors giddy – and confused.

With shares trading above its May 2012 initial public offering price of $38, scores of market participants are mulling whether it’s time to take the plunge and buy shares or pull the trigger on the lot they own.

Money Morning¬†Chief Investment Strategist Keith Fitz-Gerald cautions investors not to go lured in. He compares FB to over-hyped companies of the past that left many investors with buyer’s remorse.

“Bottom line to me is Facebook may prove to be a great short-term trading opportunity, but I remain absolutely convinced it has no place in a long-term investor’s portfolio,” Fitz-Gerald said July 25, after FB stock rose on a better-than-expected earnings report. “Where’s Eastern Airlines today? Where’s Palm Inc.? Research in Motion (NASDAQ:BBRY)? AOL Inc. (NYSE:AOL)? Myspace?”

Don’t Buy Facebook Stock

Trading at a lofty 40 times next year’s earnings, versus a mid-teens multiple for the broad-based Standard & Poor’s 500 Index, Facebook shares look expensive. And with a current market cap of $93.18 billion, Facebook’s rich valuation is more than three times that of Yahoo! Inc. (NASDAQ:YHOO) and two times that of Hewlett Packard’s (NYSE:HPQ).

Additionally, scores of disgruntled investors simply want their money back after hanging on for more than a year, watching and waiting, as Facebook shares spiraled downward to a low of $17.55 last fall.

That’s one reason why Carter Worth, chief market technician at Oppenheimer, says the recent rally will stall.

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