I see a few sides to this.
- Facebook is VERY well run. Say what you want, but Mark Zuckerberg has done an absolutely impeccable, incredible job, and as long he can stay focused running the show, Facebook will keep ahead of its game.
- Facebook are making a decent profit already.
- Recovering this money by looking only at their current profits is misleading. If you looked the early days of Google's growth, it was exponential. And remained so. Facebook's revenue and profits are also growing exponentially. It won't take 25 years to break even on investment at those prices, more like 5, and probably less, as investment money allows them to do even more and scale their growth faster. Also, similar strong fundamentals that drove Google's exponential growth, are in place at Facebook.
- 600 million users and growing, they're almost at 10% of the planet's population. In another year or two, they'll top 1 billion, and if they keep playing their cards right, who knows.
I certainly think there is strong potential for Facebook to deliver that value to investors.
On the flip side, Goldman Sachs appear to be bedroom-buddies with the Fed, so this is probably partially funded on borrowed newly minted money from the Fed's "stimulus". IOW their special friends at the Fed give them inflation-funded money, and all they need to do is beat government interest rates (which are 0%, so not hard) in the private securities market, pay back, and they get to keep the difference, nice business model eh? And if they lose, no problem, the losses are socialized. In other words, this isn't entirely "real money" they're investing, and the downshot of that as far as Facebook's valuation is concerned is that it means that part of the valuation includes a speculative component - i.e. there may be a tech bubble here driven by easy credit from the Fed - in which case they may be overvalued, and the next market correction could see them take a hit. The only question is, how much of the valuation is speculative and driven by easy money (yes, the same easy money that got the world into the financial mess, because little has changed at the top). Still, Facebook would be in a good position relative to its industry peers even after a market tumble - a popping bubble wouldn't destroy them, just hurt them, and Zuckerberg is smart and good with money. My advice to Zuckerberg, 'don't spend it all at once'.
