Facebook Inc (FB) Worth Only $64 A Share: Trefis

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Facebook stock hit a new high on Tuesday as investors greedily gobbled up shares at higher and higher prices. But wait just a minute, say analysts at Trefis. They see tremendous downside to the social network’s shares, saying they think the stock is worth just $64.02 per share and that the company’s market capitalization should only be $185.5 billion.

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Those numbers compare to the current price of around $80 per share and current market cap of around $224.7 billion.

Facebook Inc (FB) Worth Only $64 A Share: Trefis

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Facebook: a sum of the parts

Trefis analysts typically analyze what a company is worth through a sum of the parts analysis and using a discounted cash flow methodology.

In their report dated Dec. 23, 2014, they estimate that text and display ads make up about 87% of Facebook’s value. They say transactions on virtual goods make up 3.5% making the segment worth about $878 million, while social commerce makes up 2.5% of the social network’s value or about $135 million. Facebook’s cash, net of debt, makes up 7% of the company’s value, according to Trefis analysts.

Projections for FB’s user growth

The firm’s analysts expect Facebook Inc (NASDAQ:FB) to grow its average monthly unique users from the current 1.35 billion to nearly 2.15 billion by 2021. They note that one of the most important factors in the social network’s growth is getting its platform unblocked in China, which management has been trying to do for some time. Continued success in mobile is also important for growth.

The analysts estimate that by 2021, there could be 4.2 billion internet users globally, which suggests there could still be room for more upside. They see the possibility for more than 15% upside to their price estimate if Facebook Inc (NASDAQ:FB) grows its average users to about 2.5 billion by 2021. However, if the social network can only grow its user base to about 1.8 billion by then, they see a downside risk of more than 10% to their price estimate.

Revenue per Facebook page

The Trefis team projects revenue per thousand page views to increase from about 42 cents last year to about $1.17 by 2021. They note that the company has been working on improving engagement through Timelines, Graph Search, News Feed ads and making integration with third-party content providers more seamless.

If the social network can grow its revenue per thousand views to $1.40, they see an upside of 15% to their estimate, but if Facebook only increases it to $1, they see the possibility of 10% downside.

Shares of Facebook Inc (NASDAQ:FB) edged upward less than 1% in premarket trading this morning.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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6 COMMENTS

  1. They oughta join the guy at BofA. They have TSLA at $75. Geniuses.

    I see no part of this warm pile that mentions “the sun of its parts” as Instagram, WhatsApp (which won’t be monetized for 5 years) and Oculus VR. Plus other business services. Maybe $65 for Facebook alone, now, but with Instagram, WHatsApp and Oculus et al., the current $81 sounds nominal, even cheap.

  2. Michelle, stick to writing TV scripts. You are out of your league – COMPLETLY – in attempting to now, change course, and become an analytical stock star. For instance, do you understand analysts who do not own any shares of a stock, wish they had bought earlier, but didn’t, do not like the present price of the stock, so hire someone like you, talented but money-hungry with stars in your eyes, to bash a stock down – and, then…then…whoah ho…they buy the stock bigtime? Retired owner of multi-radio, TV, newspapers. I retired when “ambush” journalism became the “norm.” Do something else with your life. Best regards. Texas Easy

  3. I’m pretty sure Google heard that same stuff about their stock. And look where it’s at now. There’s always going to be haters to another’s success.

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