Facebook Valuation

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.

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Jason is an technical business professional who has deep hands-on technical experience as a software engineer and architect and has leveraged this experience to transition from project leadership into product management. He holds a MS in Computer Science from Northeastern University and an MBA from Babson College. He is continuously striving to learn and experience new challenges.

Posted in Equity Analysis
One comment on “Facebook Valuation
  1. So with a price of $21 today, seems like the growth rate would have been better than the Forward P/E – perhaps FB is beyond the “high growth” phase of its lifecycle

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