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