The drop in Facebook's (NAS: FB) share price on Sept. 4 isn't news -- drops haven't been since the IPO in the middle of May when Zuckerberg became an instant billionaire. The stock has continued to plummet for a number of reasons since. What's a bit surprising is the beating management, Facebook's business model, and its image continue to endure. Who knew the storm would last this long?

Facebook has revenue-generating concerns, and obstacles to overcome relating to future growth -- we all know that. That was the case even before the IPO debacle. But now we're getting to stock price levels that warrant consideration from even the most ardent Facebook opponents.

The latest price drops
If his recent article is any indication, The New York Times' Andrew Ross Sorkin is not a fan of Facebook in general, and CFO David Ebersman in particular. The most recent drop in Facebook's share price -- to record lows -- is directly related to an article published in the Times. In it, Sorkin blames the Facebook CFO for the initial stock pricing problems and getting greedy by saturating the pre-IPO market with too much stock. There are already headlines screaming some variation of "Facebook CFO Will Be First to Go" as a result of the write-up.

The (new) bad press comes on the heels of the recently unlocked insider stock that drove down share prices, which was preceded by a negatively received earnings announcement. And Facebook's stock doesn't experience slow, steady declines: When it drops, it drops precipitously. Consider the past month: On July 25, Facebook was trading at $29.34 a share, already significantly off IPO levels. Here we are a month later, and getting back to a stock price of $18 would be an improvement.

Reasons for (cautious) optimism
At 99 times earnings, and more stock ready to be unleashed on the market due to expiring insider stock sales restrictions, it's easy to discount Facebook right now. Who could blame you? But let's remember it's an Internet growth firm; outlandish multiples and betting on future growth is the norm.

Heck, LinkedIn (NAS: LNKD) plays in the social media sandbox -- granted, on the business side of things -- and no one has a problem with its current valuation at 107 times earnings. Nor should they: LinkedIn is a solid Internet growth play, with multiple business lines and a clear business plan. And just as importantly, LinkedIn avoided IPO missteps and the bevy of negative publicity that comes with it.

What about the growth prospects of Facebook? Based on projected earnings -- though that requires trust in management's forward-looking statements -- Facebook is reasonably valued. In fact, considering it's an Internet growth firm, Facebook is downright cheap at 28 times future earnings.

The inability to generate significant revenue from the mobile marketing revolution is a long-standing thorn in the side of Facebook shareholders. With over 50% of Facebook users now accessing the site via mobile devices, the opportunity is nearly limitless. According to a recent Morgan Stanley report, Facebook is only beginning to tap into the mobile market.

As per the Morgan Stanley report, in July mobile-specific stories were presented to Facebook users about once a day. In August, that number jumped to as many as six per day. And at an estimated revenue rate four times higher than traditional desktop ads, Facebook is finally showing signs of life in the world of mobile computing.

Going forward
In no way does Facebook warrant a position in your portfolio alongside larger, more established firms in the social media space. Google (NAS: GOOG) may be new to the social party, but with nearly unlimited resources, diversity of revenue streams, and proven track record, it's a less aggressive growth alternative than Facebook.

AOL is another avenue into online media, particularly for investors onboard with the notion it's all about content. Like Google, AOL is an established entity that isn't likely to surprise shareholders with the boneheaded moves Facebook investor's have been subjected to.

But for the more aggressive investor, Facebook is getting close to contrarian price levels. Yeah, there will be more hurdles along the way. But if Facebook could institute a public relations strategy, along with a slowly improving mobile marketing effort, even the naysayers would agree we're getting close to buying levels.

Despite what Zuckerberg, Ebersman, and Facebook management may or may not have thought, successfully running a public company is not for the faint of heart. There are a host of risks and challenges to address, as Facebook shareholders are well aware. For a rundown of what Facebook needs to do going forward, and the missteps to avoid, check out the Fool's premium research report on Facebook.

The article How Much Longer Before Facebook Becomes a Buy? originally appeared on

Fool contributor Tim Brugger currently holds no securities positions, including any mentioned in this article. The Motley Fool owns shares of LinkedIn and Facebook. Motley Fool newsletter services have recommended buying shares of Facebook, Google, and LinkedIn. The Motley Fool has a disclosure policy.
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Dave Legassi

Facebook is nothing more than a bore these days. Actually, it's a single sign-on conglomerate that controls and tracks data across 100s of 1000s of websites. It's simply not what the masses want anymore. You hooked us all by being a massive phone book. Now you're just a biased ad platform that thinks they know what the user wants. The reality is I have never, ever seen one ad on FB that has any relevance to me. I have never, ever clicked on an ad off FB and never will. I don't subscribe to advertising on mobile apps. To me and everyone I know, they are useless. We grew up changing TV channels, flipping magazine pages, turning the radio station when commercial comes on. We're no different on FB. The majority of users simply overlook ads. Some even block the ads. Regardless, if FB is banking on monetizing their user base through more invasive advertising, it's an epic failure. The lack of innovation and strict focus on aggregating more of your data so they can better target you is a joke. FB lacks any real purpose anymore. You don't go there anymore to find old friends. You're sick of seeing photos of your friend's kids. You've never liked the design to begin with. What is FB? An advertising platform that used to be somewhere people went to connect with old friends. Now it's a cesspool of spam, fraudulent accounts and invasive advertising. Adios FB. You're useless and your stock will never be a buy or sell for me. I simply would never touch garbage like that. The fact alone that the stock jumps or drops in droves because of one article posted or one rating issued is pathetic. People need to look at this company and see they make absolutely nothing but technology to track your existence online. That is it. Nothing more. Nothing less. Who needs them? None of us!

September 05 2012 at 12:56 PM Report abuse rate up rate down Reply