Is Facebook really worth $50-billion?

  @Gooch700 on January 03 2011 8:56 PM
Facebook CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters in Palo Alto
Facebook hit 500 million users in 2010. The site has become a part of the cultural lexicon, and given us a new verb: "defriend" REUTERS

Red-hot social network company Facebook is in the news again after having received $500 million in investments from Goldman Sachs (NYSE: GS) and a Russian investor in transactions that gives Mark Zuckerberg’s company a value of $50 billion.

But does a company that manufactures no tangible products and employs only about 2,000 people really be worth that much money?

After all, the estimated market cap valuation of Facebook now surpasses that of Boeing (NYSE: BA), a company that has tens of thousands of employees worldwide and makes about three-quarters of the planet’s commercial aircraft.

Moreover, Facebook is not too far behind the market caps of

Ford Motor (NYSE: F) [$60-billion] and General Motors (NYSE: GM) [$56-billion].

Lou Kerner, social media analyst atWedbush Securities, told CNBC that Facebook is worth every cent of that valuation, and perhaps much more.

“Facebook is the most transformational media company of our day,” he declared, adding that investors in the private marketplace have already placed a value on the company of more than $60-bln, which means Goldman Sachs might actually be getting a nice discount on its investment.

If and when Facebook goes public, he adds, the company could be valued at nearly $100-billion. However, Jeffrey Saut, chief investment strategist at Raymond James, is highly dubious of these numbers and estimates that Facebook would have to generate $5.4-billion in revenues just to maintain that theoretical $50-billion market cap figure.

Saut thinks the lofty valuation represents a bubble and cannot be sustained.

Kerner countered that investors interested in buying shares of Facebook are looking at revenue trends of a few years from now, not what it is doing today.

Noting that in many countries, Facebook accounts for as much as-quarter of all page views and time spent on the internet, Kerner thinks that by 2015, the company could generate as much as $20-billion in annual revenues, which would make his aforementioned $100-billion valuation quite reasonable. Saut is highly skeptical of these numbers, but he conceded that the emergence of companies like Facebook is a reflection of the economy’s shift to services from manufacturing.

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