Know Your (Price) Limit Before Buying Facebook Stock

By Julie D. Andrews 

If you’re contemplating whether to place a buy order for Facebook, weigh the pros and cons before making a final decision.

The Christian Science Monitor highlighted five items that potential stock buyers should consider before placing a call to E*Trade.

Among them, Staff Writer Mark Trumbull raises interesting points, such as: Price matters. It is worth identifying, before the volcano of buy-sell activity takes off, what share cost is too high to make the proposition worth it to you, on a personal level. He wrote:

Financial pros expect the shares to open significantly higher than the official offer price.

That’s because those who will profit most from the initial public offering are Facebook foundlings, high-risk-taker investors who got in at the earliest startup stages, and financial firms and investors that were able to meet the qualifications to buy early, at the offer price.

Going by the current range for share-price, Facebook is valued at about 150 times one year’s earnings, and about 25 times annual sales, Trumbull pointed out, adding that this puts the pressure on the social network to not only keep bringing in revenue, but to increase the amount it is earning.

Casual investors who do decide to go for it can always set up a cap on the share price they will buy at, by way of a limit order, with a trading website or firm. Then, the buy order will only go through when the stock is trading at the price the investor selected.

Apple Co-Founder Steve Wozniak recently said in an interview with Bloomberg Television in Sydney:

I would invest in Facebook. I don’t care what the opening price is.

All in all, there’s only one person who can decide whether buying Facebook shares is worth it — and that’s you.

Image courtesy of Shutterstock.