Facebook is a good company and its shares may do well over the long term, but investors should avoid it for now, says Gregory Slayton, managing director of Slayton Capital.
The company, which went public Friday but only gained 23 cents to close at $38.23 a share, boasts an impressive 900 million subscribers but time will tell if Facebook can find ways to drum up new revenue.
"I would take a cautious view in the short term but long-term I am bullish. I think this is going to be a very interesting play," Slayton tells Newsmax TV.
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General Motors, one of the largest advertisers in the U.S., has said it will scrap its Facebook advertising campaign, and analysts worry that while the company boasts an eye-catching number of users, monetizing that base may prove problematic.
"I think concerns are valid and I think concerns are always valid when new technology is pushing forward and basically establishing a new technology infrastructure," Slayton says.
"That's the real bet with Facebook. Is Facebook truly the next generation of the world wide web or is it going to be replaced in three or four years by something else?"
Still, a lot of those users aren't flocking to something new such as niche social networks, Slayton says.
Building a base of friends takes time and makes owning a Facebook account more enjoyable.
"Communities, whether you are talking about eBay or Facebook, communities are difficult to dislodge," Slayton says
Whether Facebook eventually lives up to the hype surrounding its initial public offering remains to be seen, but a high-profile arrival of Facebook's caliber to U.S. equities markets is certainly welcome.
"I think this is going to be a positive impact on the market. I think you are going to see more companies coming to market," Slayton says.
Facebook comes on the heels of other technology offerings, including LinkedIn and Groupon, and investors can rest assured that today's budding technology IPO revival isn't signaling a return to the dot.com boom of the late 1990s.
"Unlike the dot.com boom back in the end of the 1990s, I think investors will be much more cautious this time," Slayton says.
And the high-flying dot.com bombs? “I don't think we are going to see a repeat of that because at least you need a potentially viable business model and very serious traction in terms of membership and membership growth."
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