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 Now the company's $190 billion market value makes it bigger than
such bellwethers as Coca-Cola and AT&T. It's not a member of the Dow
industrials, but if it were, it would be larger than two-thirds of
that index's 30 members.
Shares of the world's No. 1 social network touched a record high of
$76.74 on Thursday after earnings and revenues easily topped
analysts' forecasts, boosting its market value to nearly $194
billion. That ranks it 15th in the Standard & Poor's 500 benchmark
index, just below the $196 billion market cap of International
Business Machines Corp.
"A 100-year-old company with real assets versus a company admittedly
with virtual assets and they are trading at the same market cap –
crazy," said Kim Forrest, senior equity research analyst at Fort
Pitt Capital Group in Pittsburgh.
The speed of Facebook's rise to mega-cap status is what's notable.
It took Apple Inc nearly three decades to achieve such a market
value; Google Inc needed five years.
Facebook has only been public for a little more than two years, and
only joined the S&P 500 seven months ago. Since S&P Dow Jones
Indices announced the addition on Dec. 11, Facebook shares have
risen 54 percent.
The gains represent a reversal of fortune for the social media
company. After a botched IPO that infuriated investors in May 2012,
the stock slumped, underperforming for 15 months before finally
eclipsing its offering price of $38 in August 2013. Since then,
Facebook shares have been unstoppable, doubling in less than a year.
"People understand the world is moving to mobile, and when you look
at the time spent on mobile, Facebook has the lion's share," said
Walter Price, senior portfolio manager and managing director of the
AllianzGI Global Technology fund, which owned more than a million
shares as of June 30.
The firm has leveraged its position by selling put options, or
negative bets on the stock, and buying more call options, or bets on
the shares rising further. "This is a momentum stock you can put a
P/E on," Price said.
Facebook's rally has left e-commerce giant Amazon Inc in the dust.
That company's value peaked around $187 billion in January, but
closed Thursday at $165 billion. Amazon reported disappointing
results afterwards, which dragged down its stock by 7 percent,
valuing the company around $153 billion.
Facebook's market cap is still dwarfed by the roughly $403 billion
in combined market cap for the two classes of Google shares,
arguably the most similar in terms of revenue generation. However,
Facebook tops The Coca-Cola Co by about $15 billion and Disney by
more than $40 billion.
SHORT, QUICK TRIP
Apple, the S&P 500's most valuable company, needed nearly three
decades before its market value finally rose to more than $190
billion, surpassing that level in late December 2009.
[to top of second column] |
Google's move was swifter. The company went public in August 2004,
and posted a closing market value of more than $190 billion for the
first time in October 2007, right around the S&P's peak before the
financial crisis.
That's not to say there aren't detractors. StarMine, a Thomson
Reuters company, sees Facebook as more overvalued than 95 percent of
the companies in its stock universe. Using expected growth rates
over the next decade, StarMine puts an intrinsic value of $29 on the
stock. It has a high price-to-earnings ratio of 42, more overvalued
than 90 percent of the stocks StarMine tracks.
However, the stock's relentless march has left few willing to stand
in its way. Investors betting on the stock falling have dried up. In
August 2012, more than 80 percent of shares available for short bets
were being borrowed by investors expecting the stock to drop,
according to Markit. Now, just 0.4 percent of shares available are
being used for short bets.
Of the 43 analysts with recommendations on the stock, 37 are "strong
buy" or "buy" ratings, with six "hold" ratings.
"If you were looking to short names that were ridiculously
overvalued and people were not even thinking the growth was going to
continue, I wouldn't put Facebook in that category," said Stephen
Massocca, managing director at Wedbush Equity Management LLC in San
Francisco.
"That being said, do I buy Facebook here? From my perspective, I am
a value investor - I wouldn't get anywhere near it with a 10-foot
pole."
That acceptance of Facebook's legitimacy as a successful and viable
company makes the comparison to the classic names that now surround
it on the market cap list more palatable.
"In some respects, Facebook speaks to a demographic shift in the way
retailing, social media and virtually every other component of
people’s lives is being bundled," said Peter Kenny, chief market
strategist at Clearpool Group in New York.
"Investors are starting to see the brilliance of this platform in
ways that haven’t to date really captured the imagination of many."
(Reporting by Chuck Mikolajczak; Additional reporting by Ryan
Vlastelica; Editing by David Gaffen, Howard Goller and Richard
Chang)
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