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!

Facebook's Value Is No Trick Question: Street Whispers

Stocks in this article: FB GS MS

When Facebook first went public, average analyst estimates were roughly $40 a share, now they stand at $28.76, according to Bloomberg data. While Facebook's earnings and user growth have decelerated, newfound bearishness also revolves around a rethinking on the company's intangible value, as Credit Suisse's price cut shows.

From the company's IPO bonanza to summer trading lows below $18 a share, analysts like Laura Martin of Needham & Co. have had to backtrack on imprecise initial valuations that relied on the Mark Zuckerberg run company being an "option on the world." The analyst cut an initial Facebook valuation from $40 to $25 a share, as real numbers took precedent over rhetoric.

Others like Gene Munster of Piper Jaffray are sticking with valuations in excess of $40 a share, combing through metrics like click rates and teen engagement for reasons to remain optimistic.

Instead of testing the incoming class of Wall Street analysts on their ability to solve brainteasers under the pressure of a final round interview, banks may simply want reach out to college grads for a fresh take on Facebook's value.

Arguably, it is Henry Blodget, the excommunicated Wall Street internet analyst and Business Insider head, who was most accurate in predicting Facebook's worth and his efforts amounted to a simple back of the envelope analysis that any incoming Wall Street analyst should be able to sketch in an interview.

Secondly, new analysts to Wall Street should be well versed in the challenges of valuing fast-growing and disruptive tech companies. Whether it be equity underwriting, sales and trading, brokerage or investment research, business coming out of newly public Silicon Valley startups are a rare growth opportunity for Wall Street investment banks, which continue to suffer from a sharp drop in merger and trading activity.

In the third quarter, global IPO volume of just $21.3 billion was to the lowest level of stock underwriting since the financial crisis, according to Bloomberg data. Still the numbers show high growth technology and internet startups are driving whatever IPO activity remains and are up sharply compared with 2011 levels, in spite of a general malaise.

As the next set of college seniors and juniors brace for interviews to land the internship or analyst gig that will pave a path to Wall Street glory, their time may be best spent trying to run the numbers on Facebook.

For more on Facebook shares, see the calculations of Credit Suisse's price cut and why there's reason to question whether the company was misleading in its IPO disclosure of risks to a mobile strategy.

Interested in more on Facebook? See TheStreet Ratings' report card for this stock.

-- Written by Antoine Gara in New York

2 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 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

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