$13.80? That's more than I think it's worth.
Post-IPO numbers crunched ...
Facebook is worth $13.80
Amid a furor over the pricing and the glitches and the who-knew-what-and-when questions, Mark Hulbert poses another big but underasked question: What should be the price of Facebook’s stock?
May 25, 2012, 12:02 a.m. EDT
Facebook’s stock should trade for $13.80
Commentary: Here’s a fair-price calculation for Facebook
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Well, then, what should be the price of Facebook’s stock?
Rather than endlessly rehashing the events that have taken place over the past week, it is this question that investors should be asking. Surprisingly, however, few are doing so.
And yet, courtesy of a just-released study, calculating a fair price for Facebook’s stock isn’t as difficult as it might otherwise seem.
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Assuming that the total number of its shares stays constant, that works out to a price per share of just $23.26 — in contrast to its recent closing price of $33.03.
Ouch.
Actually, however, the news is even worse: No one is going to invest in Facebook shares today if its price will be 30% lower in five years. So, in order to entice someone to invest in it today, Facebook needs to offer a handsome return. Assuming that its five-year return is equal to the stock market’s long-term average return of 11% annualized, Facebook shares currently would need to be trading at just $13.80.
Double ouch.
More: http://www.marketwatch.com/story/facebooks-stock-should-trade-for-1380-2012-05-25
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