Watchhttp://moneymorning.com/facebook-stock-is-worth-7-50-a-share-at-best/
Facebook Stock is Worth $7.50 a Share at Best
Duh on you if you bought the Facebook IPO.
Double duh if you're thinking of buying Facebook stock now that it's fallen to $32 a share and lost $17.16 billion off its initial $104 billion valuation.
The company is only worth about $7.50 a share. And, no. That's not a typo. There is no missing zero or a placeholder.
That's reality. What is ludicrous is that Morgan Stanley and Facebook executives thought the company merited a $104 billion valuation at 100 times earnings.
As my good friend Barry Ritholtz pointed out recently, both Apple and Google debuted at about 15 times earnings. Today they trade at 13.6 and 18.2 times earnings and 3.75 and 4.9 times sales respectively.
As I type, Facebook's market cap is $86.84 billion and its price to sales is ridiculously high at 21.01. I think that's way out of line.
So what should the numbers be?
Try this on for size. If we use Google's price to sales ratio of 4.9 (and I am being generous here for discussion purposes), that equals a total market cap of $20.24 billion or 76.68% lower than where it's trading today.
With 2.74 billion shares outstanding, that's equal to only $7.39-$7.50 per share.
No doubt I'll get the evil eye from the Facebook faithful and Morgan Stanley for saying this, but think about it.
Revenue is already slowing and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people.
Worse, startups are already cannibalizing Facebook's user base as concerns over privacy and who likes who mount.
Companies like General Motors (NYSE: GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone.
More will undoubtedly head out the door for the same reason, since Facebook friends don't necessarily translate into revenue.
Corporate buyers are beginning to figure out that advertising on Facebook is simply not cost effective versus other media alternatives - gasp - including good old fashioned television and radio advertising, billboards and tradeshows.
Many people think this isn't a big deal. They couldn't be more wrong.
The rest of the article is pretty good too.
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Davis, CA
Actually it *should* go to those levels.
However I don't think it will. My reasoning being that too many big players will have egg on their faces, who have access to Fed "special facility" programs. So they will prop it up.
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Hmm, FB is looking like it may be UP for a third day in a row. $30 at end of the week? All the FB haterzzz are gonna be pissed. I am just confused by the volatility...nothing has really changed with respect to the company but the price is all over. Europe seems as uncertain as ever, so I am not sure that your (Vicente) theory about helicopter Ben dropping loads of cash on them is instilling much confidence in the market.
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Maybe $7.50 if you believe that the books aren't cooked 7 ways to Sunday. Zuckfuck has lied to everyone he's ever done business with and betrayed even one of his own seed investors. It's only a matter of time that something leaps out of the books.
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Up again today. Maybe $30 at the end of the week, rather than $20?
I sort of wonder if there is a concerted background effort to keep it pumped as much as possible so that all the employees don't get pissed and leave immediately after their first set of shares vest (they have them spread out over a 4 year period)? Could FB have the clout to orchestrate this with Morgan Stanley?
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bmwman91 says
go where ? hired by who ? and as if someone else really needs them ?
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bmwman91 says
fantasy! even if they came in and bought limited number today... say at $42. that would not last long and they would suffer huge .. HUGE losses... and for who... some 20-30 year old..
would you slit your own throat for a FB employee ? Fuckem!
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zzyzzx says
we have to keep that crazy idea of "creation of great wealth" myths going.
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thomas.wong1986 says
I dunno...I just wonder if they know that all the folks that have been LIVING there for the last 5 years will be pissed if the stock gets all the way down to a realistic valuation, dump what they have and bail. I assume that upper management sees it as a bad thing to have all the long-timers bail out at once.
Anyway, it's just pure silly speculation & fantasy at this point. I doubt that any entity could actually keep the stock price pumped that hard. For now, I guess that investors/speculators think it is worth more and are buying accordingly.
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I thinks its fairly valued in the low teens.. Based
on their cash on hand and earnings. However Hoodies have proven to be a poor decision maker in evaluating acquisitions so single digits is believable.
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Serpentor says
Be that as it may, it looks like FB stock is taking the scneic route. People seem to be willing to buy it at $27+. It's been almost a month since IPO...that means that it's "long term" now right? lol
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bmwman91 says
Some people I know thought Yahoo at $40 was fairly good long term value. Microsoft thought $36 was good value.. but it didnt work out that way.
All this after $300+ was a typical stock prices... shit happens really fast around here.
Well, anyway FBs and other social media stock prices going into the dump shows we are getting back to some sobriety.. which is a healthy event for everyone.
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I'm into FB@ $1.17
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Look out shorters...FB is up more than $1 today.
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So, back to almost $32 now. A friend told me his theory, and it seems plausible. Basically, "Apple saved FB's ass." When Apple announced seamless FB integration in the next release of iOS, it gave the market confidence that FB could monetize the mobile app. Sort of funny how fast things can turn around, eh?
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well. Part of the reason is that FB got added to a bunch of stock indexes because of the size of the market cap. Some index funds HAD to buy the stock.... We'll see when the lockout period ends
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It's a stretch even at 7.50 without knowing how cooked FB's books really are.
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bmwman91 says
To quote Warren Buffett: "In the short term, markets act like voting machines; in the long term, they act like weighing machines."
The IPO was very widely marketed to produce the highest possible price, officially $38 with a pop to $42. Independent analysts showed a valuation of $32, which is where the market has gone. In between, the price fell even lower because of downward momentum, litigation risk, and negative headline risk.
I have never owned FB and would neither buy nor short at the current price. The IPO price seemed unreasonably high to me, and even the current price seems high. Eventually, the p/e must fall to a rational level, but that can happen either by the price falling or earnings eventually rising. Meanwhile, "markets can stay irrational longer than you can stay solvent."