Facebook Inc (FB) Shares May Be Over-Valued: Barron’s


Facebook Inc (NASDAQ:FB) shares may be overvalued reports Reuters, said a report from Barron. The share of the social networking company surged last week following the first quarter 2013 results that were in line with the estimates.

Facebook Inc (FB) Shares May Be Over-Valued: Barron's

The closing price of Facebook’s stocks came in at $28.31 on Friday, an increase of 60 percent more than the previous year’s summer low point. Barron holds the view that the value of shares is just at $25 per share and not more than that.

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According to an article published in Barron, the share of Facebook Inc (NASDAQ:FB) are trading at 75 times it 2013 earnings estimate under generally accepted accounting principles (GAAP), whereas the search engine giant Google Inc (NASDAQ:GOOG) trades only less than 20 times its 2013 earnings.

On comparing Google and Facebook, one gathers that Google is trying its hand in a number of things ranging from YouTube, self-driving cars, interactive eye wear, maps and Android software, says the report.

The overall revenues of Facebook Inc (NASDAQ:FB) surged by 38 percent in the first quarter of fiscal 2013 compared to the corresponding quarter of fiscal 2012. The revenue was primarily backed by the mobile ad revenue, which compensated for the decline in the desktop ad revenue.

 According to the report, there can be a down slide in the revenues of Facebook Inc (NASDAQ:FB) with declining contribution from desktop ad revenue, which implies that investors are attaching a major market value of $71 billion, fuelled primarily from $1.5 billion in mobile ad revenues. The expenses came in at an increased 60 percent in the first quarter.

“Facebook seems more focused on barraging subscribers with ads to meet Street profit expectations,” Barron’s said.

Some Think Other-wise

The two top firms JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC) think the other way round in case of Facebook. In their individual reports both have emphasized that the social networking giant will be worth $35 in the next year as the returns of the company were impressive. Both the firms in their research reports are confident about Facebook’s impressive results in future as well.

The first point, which holds importance in the Facebook earning report, is the analysts are looking forward to the firm’s multiple to decline from the current levels, which is in line with the EPS and a bit more than the revenues that the company earned in the first quarter. The numbers indicate that the company is increasing its revenue at a steady rate.

The second thing that is of vital importance in the report is user metrics. According to some reports the user metrics in North America has been on the decline, but the company has overcome this news and has posted some increase in metrics in the business area, which has been most vital for the company.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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