Thursday, January 31, 2013

Facebook: Lucrative Undervalued Stock Du Jour?

Even though its stock price had been heading south since its initial offering back in May 2012, is Facebook stock now overdue for a “Bullish” rally?

By: Ringo Bones

With Facebook CEO Mark Zuckerberg adding a Graph Search feature to his famed social network site, it seems that Facebook would have already made some very enthusiastic friends in the more conservative Wall Street circles, but unfortunately it didn’t. With such “temporary” setback, is Facebook now overdue for a Bullish rally of its stock price? After all, business actuaries have valued it at 100 billion US dollars – making the famed social network more valuable than Bank of America or McDonalds.

Unfortunately, even if it is being sold as a lucrative “online advertisement engine”, conservative Wall Street types had never been convinced by the rather “unsubstantiated” valuation of Facebook. Thus its stock price, despite after the lockup period expired back in November 2012 is still going south of its May 2012 IPO price, but will it rise again someday? After all, it has already over 1 billion users.

There are a number of reasons why Facebook’s stock price could eventually rise in the future. First, Facebook is now getting 23% of its revenue from mobile smart-phone users which also forms the bulk of its advertising revenue, and then its revenue jumped 40% to 1.6 billion US dollars during the last quarter / October to December 2012 period. But despite such good news, Facebook share prices fell again after the recent announcement of its last-quarter earnings for 2012.

Primary because of the 80% profit fall to just 64 million US dollars and the most important factor is that the somewhat conservative outlook of the Wall Street Ivory Tower is still not convinced on Facebook’s 100-billion US dollar net worth. Will Facebook stock prices eventually rise someday? I'm not holding my breath. 

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