I just don’t have enough data on Facebook (FB) right now to make a research report. The company didn’t provide enough numbers to fill in the blanks.
What We Know
Here’s what we do know:
- This year (2012) revenue is expected to climb 31% and profits are expected to grow 18%.
- The company had a bad quarter last quarter (2012 Q1) and profits were only $0.09 vs 0.11 a year ago — that’s -18 profit growth. I think management purposely had a bad quarter before the IPO so this quarter and 2013’s Q1 will look better in comparison. This thesis explains why profit growth is only supposed to be 18% this year.
- Fcebook’s P/E is 63 yet the estimated Long Term Growth Rate is only 26%. The truth is we don’t know what FB’s growth rate will be yet.
- Data from ComScore shows Facebook’s site had $158 million unique U.S. users last month. This figure was down slightly from March and April. This tells me user growth in the U.S. has slowed/stalled.
Sharek’s Take
Simply, if Facebook is worth 40 times earnings the stock is worth around $20. If you think this company will grow rapidly the next few years (say profit growth of 50%-60% a year) then you could argue the stock is worth 60 times earnings, which is that $30 the stock seems to be hovering around.
I do think the P/E should be closer to 40 than 60 — the stock is more likely worth $20 than $30 — but until FB can give us one quarterly earnings report to analyze, I don’t have a take yet.
