Facebook (Nasdaq: FB) Stock Is on Fire - So Don't Get Burned

Facebook (Nasdaq: FB) stock closed over $39 for the first time ever Monday, but the gains were short-lived. In mid-morning trading Tuesday, FB shares slipped more than 2% to $37.94.

Nonetheless, Monday's milestone, which took a long 14 months to achieve, left many investors giddy - and confused.

With shares trading above its May 2012 initial public offering price of $38, scores of market participants are mulling whether it's time to take the plunge and buy shares or pull the trigger on the lot they own.

Money Morning Chief Investment Strategist Keith Fitz-Gerald cautions investors not to go lured in. He compares FB to overhyped companies of the past that left many investors with buyer's remorse.

"Bottom line to me is Facebook may prove to be a great short-term trading opportunity, but I remain absolutely convinced it has no place in a long-term investor's portfolio," Fitz-Gerald said July 25, after FB stock rose on a better-than-expected earnings report. "Where's Eastern Airlines today? Where's Palm Inc.? Research in Motion (Nasdaq: BBRY)? AOL Inc. (NYSE: AOL)? Myspace?"

Don't Buy Facebook Stock

Trading at a lofty 40 times next year's earnings, versus a mid-teens multiple for the broad-based Standard & Poor's 500 Index, Facebook shares look expensive. And with a current market cap of $93.18 billion, Facebook's rich valuation is more than three times that of Yahoo! Inc. (Nasdaq: YHOO) and two times that of Hewlett Packard's (NYSE: HPQ).

Additionally, scores of disgruntled investors simply want their money back after hanging on for more than a year, watching and waiting, as Facebook shares spiraled downward to a low of $17.55 last fall.

That's one reason why Carter Worth, chief market technician at Oppenheimer, says the recent rally will stall.

"You have to be concerned with overhead supply" of Facebook shares, Worth told CNBC. "So day-to-day, we think there's little upside. It will be stuck here for weeks at least."

After being stuck in the low-to-mid $20s for months, FB stock has soared some 44% year-to-date.

But when compared with other social media stocks, FB's gains look uninspiring...