Thursday, September 30, 2010

Is Facebook Worth $33 Billion Dollars? Who is Smoking Dope?

There was an article from the NY Times by Andrew Ross Sorkin about the Value of Facebook

There was also two competing blog posts one from GigaOm and one from Hacker News. Links are in the article. Without going into a drawn out discussion, and forget the two Blog Posts written by people with no financial experience, I will make this easy. Yesterday's post discussed the potential for misleading numbers from Facebook. I also had posted recently why Social is not in the C-Suite showing the ridiculously pitiful Facebook Fan Page performance for Big Brands.

I can use a myriad of stocks for comparison but since I used Apple yesterday let me use them.

If you had money to invest who would you invest in if you had to choose one:


Market Cap: 262Bil      - total value of all shares outstanding
P/E:  21.63                  - Price per $1 in earnings
EPS: 13.29                  - Earnings per Outstanding Share

Apples cost per dollar of revenue is $4.36 This company had $42bil in revenue for it's last fiscal year ending Sept 2009. It is on a $60bil revenue run rate as of last quarter ending Jun 26.

In fact they are on pace for $11bil in NET PROFITS. That is Microsoft and WalMart Territory!


Market Cap: $33bil
$1.5 bil in revenue
Profits? Unknown.

At $33bil you pay $22 per $1 in revenue
P/E ratio is unknown. Lets be generous and say that 33% is NET profit so $500mil

That would make the P/E ratio of 66 which would make it one of the Riskiest Investments in the Stock Market (Higher the P/E the higher the risk)

Who do you invest in?

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