Facebook, an information sharing application that allows ordinary American’s to post everything from pictures of themselves to news regarding their latest restaurant experience, now has a market capitalization exceeding $200 million.
Facebook now ranks as the 22nd largest company in the world
With the stock closing at $77.89 per share, the company is now valued at $201.6 billion, making it the 22nd largest company in the world, ahead of Toyota Motor Corporation and just behind Verizon Communications, a Bloomberg report noted.
When Facebook first launched into public stock trading with an initial public offering in May of 2012, the lack of revenue and the perception the stock had been significantly overpriced led to a dramatic price drop. The stock has risen significantly since that point, in part on the back of strong mobile revenue advertising gains.
Facebook shares have soared over 81 percent in the previous 12 months, much higher than the S&P 500, which had a strong year with a 21 percent increase. Facebook also have much higher capitalizations than stocks such as Oracle and International Business Machines, the Bloomberg report noted.
Facebook’s dramatic rise in stock price
Facebook’s stock price has risen dramatically while its revenue, estimated at $12.2 billion in 2014, are but a fraction of more established companies. Compare this with Verizon, which has over $100 billion in 2013 sales and is a relative value. The estimated 2014 price earnings ratio for Facebook is 48, representing a high stock price relative to the stock earnings. Verizon Communications Inc. (NYSE:VZ), by comparison, is estimated at just under 14. By comparison to a major tech name that has significantly diversified its revenue stream, Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG)’s price earnings ratio is 22.
Facebook has seen higher mobile revenue along with an increase in the average price paid by advertisers. According to the Bloomberg report, the average ad price more than doubled from a year ago, even as ad impressions declined 25 percent over the same period – not a good long term sign that core usage is dropping.
For its part Facebook has been attempting to diversify its revenue stream from what could become a fickle social media market driven by what’s cool. Facebook said in February it would pay nearly $19 billion for the messaging application “WhatsApp Inc.,” but this property, like Facebook, is nowhere near generating profitability that would normally drive such a price multiple. The company also purchased virtual reality headset maker Oculus VR Inc. for nearly $2 billion. Facebook founder Marc Zuckerberg said the virtual headset will be a major communications device after mobile phones.