The Facebook IPO was finally announced – 5% of the company for a targeted 5 billion. Alot of people have an opinion on the valuation – I will add mine.
According to the filings, last years profit was 1 billion. So that puts Facebook a market cap of 100 billion, and a trailing P/E of 100. To place that in context, Amazon has a market cap of 84 billion and a trailing PE of 134. Apple has a market cap of 437 Billion and a trailing PE of 13.
Amazon’s PE has always been high due to the high revenue growth – for such a big company their year over year revenue growth is still amazing (30%+). Facebook has a huge opportunity to increase their revenue – the revenue per user is tiny – and they have a bunch of ways they could increase it – more adds, social gaming, skimming % on Facebook credit transactions.
I am not a big Facebook user, or frankly a Facebook fan, but given the opportunities open to it it doesnt seem inconceivable that they could execute on at least a few of their opportunities. So put me in the camp that I think if the IPO comes out at the predicted price, it has a chance to be a pretty good investment.