So do you really want to be long on FB?

The following is an email response from my "in the know" cousin who does a lot of trading...had asked him for his opinion on linkedin and fb

When FB went public at $100+BN valuation and LinkedIN was trading at ~$89/share, it was the most obvious pair trade I had seen in a long time (FB was trading at a premium and had a much worse monetization biz model). I was screaming long LINK, short FB...and put my $ where my mouth was, road LinkedIn from $89 and sold out most of my position at $123...and made 150% in one day with some FB puts (when it intially went from ~$28 to $24 in late July), only to reload on some FB puts and give it all back when stock was at ~$22 (but I'm holding those and they dont expire until jan 2014) :-).

Now that LinkedIn has run up to ~$158, I think it has a lot more downside, but would never bet against it...still way too much room to run and just a beautiful business model (must have for all recruiters around world).

FB may also run up a bit given the nice frothy market for equities, but it could also come crashing down to the teens again (I think it's intrinsic value is ~$20bn, not $60bn...when you think of pure play ad companies, which is what they are). The main issue with FB is the stock jumped way up when people realized that they were able to monetize mobile - >BUT that does not change the fact that they still make ~1/2 as much on a mobile visitor as from a desktop visitor, and that shift in traffic is not slowing down (just passed 50%).

So, do you really want to be long on a stock that has:

1. Decelerating user growth and no growth in developed economies...almost all of the user growth is in developing countries where each user is worth ~1/3 to 1/2 of a developed country user
2. Traffic experiencing massive shift to mobile which does not lend itself well to an ad business which needs screen real estate (ie inventory) to be effective
3. Graph Search is cool but how to monetize?...it's really just Bing (I have 1,500 "friends" so it's cool for me to see who i know in a specific city if I'm traveling, but for the avg FB user that has ~200 friends, this is really just an embedded Bing Search in FB since 99% of the searches won't have results - the ecosystem is way too small for general search queries) Again, GOOG and AMZN has a huge advantage here with PURCHASE INTENT
4. FB Gifts was a flop

Look, I like FB as a business and I think it will be around for a long time to come, I just think the stock is still way ahead of itself....value is much closer to $15/share. I get the option value of a massive database of knowing what people Like, but what makes the most sense with that info is ads, and that is what they've been doing now for a long time (for good reason - why they have $6bn in rev). Yes they will get gradually better and increase the $ per user over time, but not fast enough IMO to offset the slowing growth and shift to mobile...

Anyway, LinkedIn has also run up to sky high valuations, but they are MUCH earlier in the growth cycle and have a lot more room to run (and have a proven monetization model that doesn't depend on ads)....so I'd argue it makes a lot more sense...either way, I'm not bullish on either at these levels. Once FB hits $20, again, then let's talk :-). If I'm wrong and they are able to find that magic bullet to monetize their massive base (basically the stock price is giving them credit that they will figure it out), then hats off to them. If not and the headwinds mentioned above start slowing revenue and earnings growth, look out below.