Facebook Valuation > $100 Billion: The Math Done!

According to Business Insider, on its final Pre-IPO private market transaction on SharesPost, the private capital online marketplace, shares of Facebook traded at a value of $44.10 per share. Using the 2.33 billion fully diluted outstanding share count cited in Facebook’s IPO prospectus, that equates to a value of just under $103 billion.

Given Facebook’s last year earnings of $1 billion, that gives the firm an implied P/E of approximately 103X, which is incredibly high, considering that for Apple and Google, the ratios are respectively, 17X and 22X. Moreover, in absolute terms, Facebook’s valuation is 1/2 that of Google, whereas its revenues are 1/10th that of Google’s (1/3rd of Google’s Free Cash Flow).

The Business Insider’s report could not be independently verified at the time of this piece; however, the latest contracts posts on SharesPost do show that Facebook’s valuation has been hovering around the $100 billion mark, even exceeding at times, in private transactions.

To justify such valuations, Facebook has to grow incredibly big, incredibly fast. Most investors and analysts are counting on Facebook finally monetizing, post-IPO, on its approx. 1 billion global users – something it has not done extensively nor successfully yet.

Meanwhile, according to PrivCo, the private company data accumulator, Facebook is rumored to begin its roadshow in the first week of April, 2012. However, with Facebook Q1 ending on March 31, 2012, it appears unlikely that the roadshow will begin so soon after the close of Q1, since Facebook would need to disclose Q1 results prior to launching the roadshow. Also, the Wall Street Journal reports that Facebook is targeting May, 2012 for its IPO., which seems quite realistic.

Whatever happens, the next few months are going to be eventful (Finance pun intended) and the next few years, tumultuous!

AAPL: To Buy and To Hold

Apple Inc (AAPL) shares have hit an all-time high of $600.01/ share (before closing for the day at $585.56/ share), giving the company a $545 billion valuation, making it the largest company in the world in terms of market capitalization. This happened right after the first batch of “the new iPad” was sold in Australia (from telecom company Telstra’s stores); soon to be followed by sales in Japan, Germany and the US, from retailers like WalMart, Best Buy & Radio Shack apart from Apple’s own Apple Stores.

The company shares reached $500/ share only a month back and the share price has jumped 44% this year alone.

Apple could be valued even higher, according to Morgan Stanley Analyst Ms. Kathryn Huberty, who revised her target price from $515 to $720, predicting that the company would go to $960 (or higher) on a $80 Earnings Per Share (EPS) in 2013. This is based on a Price-Earning Ratio (P/E) of 12, which is at the lower end of Apple’s historical forward P/E (currently at approx. 17). Morgan Stanley is not the only firm revising their prices upwards, earlier Piper Jaffray and recently OppenheimerUBS also have revised their target prices for AAPL. I am sure, others institutions will soon follow suit. IF Ms. Huberty’s price predictions for 2013 come true, that would give Apple Inc. a market valuation to the tune of a mythical $1 trillion!

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We All Fall Down – Stock Markets Tumble

Stocks markets in the US, Europe, South America and the Asia-Pacific are all tumbling, fueled by fears of a global recession.

The outlook for global economic growth appears dim, due to bad news from a number of fronts. In the US, factory activity in the Mid-Atlantic region fell, while US home sales unexpectedly fell in July and new claims for jobless benefits grew more than expected. In Europe, fears that the debt crisis could infect the region’s financial system resurfaced, also US federal and state regulators’ scrutiny of the US arms of Europe’s banks and some European banks’ higher interest rates for US dollar loans, led to worries about spillover of Europe’s debt crisis into the US banking system. The decreasing global consumer demand and markets contagion led to other markets’ falls.

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And the Slide Continues … (But That’s Ok)

Stock markets are tumbling all over the world. Along the lines of my prediction in a recent post, stock markets in the US, Europe, Latin America & Asia, along with commodities markets, experienced significant declines.

Wall Street suffered the biggest fall in two years, brought about by massive “sell-offs” by investors, triggered by “great fear” of a US recession, while European markets also fell significantly, driven by the sell-off contagion and worsening debt problems in Europe’s large economies, including Spain & Italy. Latin American and Asian markets were not far behind either, as the sell-off continued on a global spree.

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