Facebook Inc (NASDAQ:FB) stock has seen a massive decline recently, and as a consequence, it is trading near record low earnings multiples, says a report from Reuters. Wall Street widely makes use of PEs to gauge the relative value of stocks. In 2012, Facebook’s PE declined to as low as 31 following its botched public listing, after which its stock remained below its initial public offering price for more than a year.
Facebook PE near IPO level
In recent years, Facebook has been among Wall Street’s top stocks, along with tech industry giants such as Netflix, Apple, Alphabet and Amazon. However, so far in 2016, the company’s stock has declined 7% owing to the broader market selloff triggered by dropping oil prices.
According to Thomson Reuters’ data stream, shares of the social networking giant have moved steadily higher in recent years, but investors have cut down the multiples they spend for each dollar of Facebook’s expected earnings over the next 12 months. It was 58 in February 2014 but has been reduced to just 32 this week, the report says.
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Comparatively, the price to earnings ratio for Alphabet is 21, and for Twitter, it is 29. The latter is going through really tough times as it has been struggling to add users to its platform. Twitter is also losing its top executives at a really fast pace with four of them leaving over this weekend. The average PE for the S&P 500 is about 15.
FB – Additional revenue this year
Facebook Inc (NASDAQ:FB) will release its fourth-quarter earnings report today after closing bell. For the quarter, the social network is expected to post revenue growth of 39% and net income growth of 35%, which is in line with growth rates in recent quarters.
Pivotal Research Group analyst Brian Wieser, who has a Buy rating on Facebook, said, “Facebook is eating the lunch of everybody in the industry and along with Google is in a co-hegemonic position where both are able to capture a disproportionate amount of spending.”
Facebook could witness additional revenue growth this year owing to the retail launch of its Oculus Rift virtual reality hardware. The messaging service WhatsApp is also expected to boost Facebook’s revenue.
On Tuesday, Facebook shares closed up 0.34% at $97.34. Year to date, the stock is down by almost 7%, while in the last year, it is up by over 25%.