Re:Why Facebook is not worth $ 100 billion (or what is busin...
by shingen on Saturday March 17, 2012 @04:22AM
(#3716645)
They're worth a hundred billion... three or four years post IPO, and if they don't screw it all up.
As an investor, they're not worth buying at a hundred billion. There's little to no value upside over the next five years (value, not price; value being what you get, price being what you pay), short of a stock market bubble spiking everything.
It's not surprising FB would get a $100b valuation though. Investors are desperate for growth.
Compression is a word FB investors should get used to. Facebook will spend years growing into that valuation, much like other tech stocks in a similar outsized valuation situation.
Google for example has returned a weak 6% per year for the last five years. Not much greater than the dividend that Verizon and AT&T pay. eBay has spent a decade growing into their crazy dotcom days valuation, and now sport a very modest 15x pe ratio.
At $8 billion in sales, FB can generate $3 billion in net income. Their model scales extremely well in terms of margins and expenses per extra dollar of sales/profit.
At $3 billion in net income, they'd have a 33 pe ratio. They can absolutely hold a valuation around those levels three years out. This is assuming their sales growth continues to slow. However, point being, there's no value upside left in the stock.
As an investor, they're not worth buying at a hundred billion. There's little to no value upside over the next five years (value, not price; value being what you get, price being what you pay), short of a stock market bubble spiking everything.
It's not surprising FB would get a $100b valuation though. Investors are desperate for growth.
Compression is a word FB investors should get used to. Facebook will spend years growing into that valuation, much like other tech stocks in a similar outsized valuation situation.
Google for example has returned a weak 6% per year for the last five years. Not much greater than the dividend that Verizon and AT&T pay. eBay has spent a decade growing into their crazy dotcom days valuation, and now sport a very modest 15x pe ratio.
At $8 billion in sales, FB can generate $3 billion in net income. Their model scales extremely well in terms of margins and expenses per extra dollar of sales/profit.
At $3 billion in net income, they'd have a 33 pe ratio. They can absolutely hold a valuation around those levels three years out. This is assuming their sales growth continues to slow. However, point being, there's no value upside left in the stock.