Is Facebook a fad or the real deal (pun intended)? Today, FB is going to launch its IPO with a total market capitalization of more than $100 billion dollars. Among other critics, this blogger still doesn’t get it.

How can a company with SALES of  $3.7 billion in 2011 and projected annual sales of less than $20 billion as of 2016 be valued higher than Disney? Higher than McDonald’s? Higher than UPS? Higher than American Express?

Yes, I understand that stock prices reflect expectations about future earnings. But how can Facebook’s future earnings be projected at a level to justify the opening stock price — if sales will be less than $20 billion in 2016? Answer: People’s enthusiasm (exuberance) for a company with 900 million followers. Not because that company has a long-term business plan with the profitability to justify the valuation. Time will tell! 

For a very interesting story on how Mark Zuckerberg and Facebook became the “IPO of the Century,” read the article appearing in Businessweek. Just click on the image.

   Photograph by Carlos Serrao

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.