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Mark Hulbert, MarketWatch: Facebook’s stock should trade for $13.80
"Monday's closing price of $34.03 implied a 24 percent annual growth rate for Facebook earnings over the next 10 years -- a rate that would rank above 90 percent of the companies in that industry.
Thomson Reuters Starmine, meanwhile, more conservatively estimates a 10.8 percent annual growth rate -- almost exactly the mean for the technology sector -- which would value the stock at $9.59 a share, a 72 percent discount to its IPO price."
Reply to @Old_Joe: The founders of FB are selling big time before the stock declines further. So far the stock has lost ~ 20% since IPO launch, and the underwriters wonder why there is little interest from retailed investors.
So.... Facebook could grow at 24% a year. That would give something like, 13 billion pretax income, which is what google makes. That is certainly within the realm of possibilities. The price certainly isn't cheep by any means, but the company may grow that large.
BTW, Zuckerberg is the founder, his company, his ideas. He sold only enough to pay taxes. The VCs, etc sold their shares, but that's what VCs do when a company goes public. Its the 'exit strategy'.
Just to be clear, I'm not recommending the stock and there a lot of good reasons to be skeptical before buying this company at this price, but Facebook is an exceptional company and will grow rapidly.
Reply to @NickF: Out of genuine curiosity, how would it grow 24% a year? Growth is already slowing down and the company seems to be scrambling to figure out mobile. The company needs to expand beyond the core of people making mostly inane small talk to each other. I'm not saying that Facebook couldn't grow 24% a year, but I don't see any evidence of that happening with its current situation. What it has done up until this point is absolutely remarkable and it's not going anywhere, but I feel like it IPOed at the peak of the growth of *what it is*. Whether it becomes something more, it might. But I feel like what it is may be running up against a ceiling.
Additionally, I feel like in terms of buying smaller start-ups, you have a much larger crowd of companies (Ebay and many others, including Singapore Telecom - which has started up a "Digital Life" division branching out into startups like one of the largest US mobile ad firms and 3-d mobile ad technology) in the market looking for the "next big thing." I think you're going to see more telecom companies try to branch out to all aspects of the customer experience. How well they'll do is anyone's guess, but I think it'll happen and they are going to want a bigger piece of mobile than just providing service (being a part of mobile payments, etc. etc. etc.)
Again, I'm not taking anything away from what FB has done - what it's done is remarkable - but I think the question becomes what are the next steps from here. If one believes that Facebook will really step into their next stage well, then they can look at the stock here, hated and down 25% or so. Not something I'd do or recommend, but for those who believe in Zuckerberg to take things the next step, the stock probably couldn't be much more hated.
Comments
An excerpt from a ⇒ Reuters article:
"Monday's closing price of $34.03 implied a 24 percent annual growth rate for Facebook earnings over the next 10 years -- a rate that would rank above 90 percent of the companies in that industry.
Thomson Reuters Starmine, meanwhile, more conservatively estimates a 10.8 percent annual growth rate -- almost exactly the mean for the technology sector -- which would value the stock at $9.59 a share, a 72 percent discount to its IPO price."
BTW, Zuckerberg is the founder, his company, his ideas. He sold only enough to pay taxes. The VCs, etc sold their shares, but that's what VCs do when a company goes public. Its the 'exit strategy'.
Just to be clear, I'm not recommending the stock and there a lot of good reasons to be skeptical before buying this company at this price, but Facebook is an exceptional company and will grow rapidly.
Additionally, I feel like in terms of buying smaller start-ups, you have a much larger crowd of companies (Ebay and many others, including Singapore Telecom - which has started up a "Digital Life" division branching out into startups like one of the largest US mobile ad firms and 3-d mobile ad technology) in the market looking for the "next big thing." I think you're going to see more telecom companies try to branch out to all aspects of the customer experience. How well they'll do is anyone's guess, but I think it'll happen and they are going to want a bigger piece of mobile than just providing service (being a part of mobile payments, etc. etc. etc.)
Again, I'm not taking anything away from what FB has done - what it's done is remarkable - but I think the question becomes what are the next steps from here. If one believes that Facebook will really step into their next stage well, then they can look at the stock here, hated and down 25% or so. Not something I'd do or recommend, but for those who believe in Zuckerberg to take things the next step, the stock probably couldn't be much more hated.