Consensus on the valuation of facebook came out today – median price target is $38 a share in a range of $25 – 45. My estimate puts it at $33.88 based on current stock price and major assumptions about future earnings and CAPEX. Using a perpetuity for the growth of FB’s revenues of 3.5% growth my valuation ends up at around $25, however, I prefer to use the Forward P/E to get the terminal value in a DCF (especially for high growth companies) – which is what puts my model’s value at $33.88. So, my rating would be a NEUTRAL/HOLD – which is also the consensus. Another large assumption is the beta I assigned FB=1.0 – remains to be seen what it actually is.
Posted in Equity Analysis