There's No Way Facebook Is Worth $75 Billion-- Maybe $34.5 Billion

My internet guru just sent me the arithmetic that shows without any doubt that Facebook  can’t be worth $75 billion in market cap– much less $100 billion. At that crazy valuation, it might be the short of 2012.

Here’s why!

Facebook had $3.7 billion in  revenues– which means that at a market cap of $75 billion  it would be selling at 20 times revenues.

But, high growth internet companies are selling at an average of 6.8 times 2012  revenues. So, to be worth $75 billion in the market, Facebook would have to be valued in the market at TRIPLE  the value of the other high growth internet companies. Impossible, since we are talking about Apple, Google and Amazon.

In other words, if Facebook were to be priced  as a multiple of revenues like its brethren,  its market cap would be more like $26 billion– not $75 billion.

There’s more; Facebook had $2.3 billion EBITDA, earnings before interest, taxes and depreciation; at a $75 billion market cap that would price Facebook at 32 times the value of its EBITDA. Totally rediculous, I’d say.

Compare that 32 times multiple of EBITDA with the average high growth internet companies which are trading at 18.6 times 2012 EBITDA.  So, Facebook would have to be priced at a mighty premium valuation of 70% over  high growth internet companies  that have been  publicly traded securities for some time. Not gonna’ happen.

So, if Facebook were to sell at 18.6 times its EBITDA like its main competitors, then its market capitalization would be more like  $42.8 billion.

Therefore, I can only conclude that Facebook should be worth in the marketplace some value between $26 billion and $42.8 billion.   If evenly weighted by Wall Street analysts, Facebook would be worth about  $34.5 billion. Not $75 billion. Not close to $100 billion.  Out with the hype please.

Source Forbes