This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What Is Facebook Really Worth?

Stocks in this article: FB

NEW YORK ( TheStreet) -- I am a long-time Facebook (FB) bear.

I first predicted the social boom's bust in June, 2011, in a column at Seeking Alpha.

I even called the day of the bust in an April post, also at Seeking Alpha: "The bubble starts to bust the day Facebook goes public."

But the busting of a boom is not always the end of the story. Weak players will go under, as companies like Pets.com did during the Internet bust. But for stronger companies -- and Facebook is the strongest social player out there -- value will be found, at some price, by someone.

As of Monday's close, Facebook was valued at about $42 billion. It should get even cheaper today, as investors digest how early investors like Peter Thiel are cashing out, as reported at Business Week.

By November more than 1.7 billion new shares will have been unlocked and become tradeable. Many of those shares, like Thiel's, will have been obtained at pennies per share, or will have been grants to early employees. With no real basis in a stock with an iffy future, selling pressure will continue through the end of the year.

Still, there is value here. Take a look at Facebook's balance sheet and you will see $10.1 billion in cash and short-term investments, as of June 30. The company booked $1.184 billion in revenue for that quarter. It had a huge run-up in administrative costs during that time, causing a loss, mostly related to going public, but it also had a huge increase in research investment during that same quarter, which is a good thing.

Michael Miller, a long-time PC Magazine editor whom I trust, noted in May that Facebook has built three big data centers on which it spent more than $860 million during the previous year. (See his article at PC Magazine.

Facebook is using an open architecture for both hardware and software and is focused on managing its infrastructure at the lowest possible cost.

If Facebook can return to the 20% after-tax margins it enjoyed in its March quarter, before the IPO, and stabilize, you're looking at a company with annual sales of $5 billion, profits of $1 billion and real opportunities for continued growth.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs