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Originally Posted by Hehe
I usually value IPO at ~8 times its revenue. This would put FB at around 30B. Anything beyond that is speculation.
Plus, I don't think FB has a very clear vision on how to expand its profit. Ads is the dominant part of FB revenue, but until I see what is beyond ads or perhaps way to expand that ads potential (like google's expansion to Android) I won't put my money in FB.
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You really can't just simply value any IPO at a given number. Different companies and certainly different sectors operate on dramatically different multiples.
There are a lot of comparisons to be made between Google and Facebook, they are both clear dominant leaders in a new market with a technology that doesn't automatically show a clear growth pattern in revenues. Google currently trades at around 7 times revenue.
However, the IPO valued the company at around $24B and revenues approximately $1.5B, or a multiple of 16 times revenue. With Facebook's revenue of $4.2B, you are looking at a market cap of around $67B simply if you equate the two multiples.
I believe there is a case to be made that the multiple for FB should be even higher - if you simplify the revenue model to one that is based purely on users using the service, Google users were a much higher percentage of all searches than Facebook users are of all internet users - this means (in extremely simple terms) that Facebook theoretically has more growth potential.
Google has posted an average return of over 30% since the IPO... I could live with that in my portfolio! But by the time the general public gets to buy Facebook, I suspect the prices are going to be so crazy that it's going to be hard to logically make the purchase...
Mark