Home » Technology » Is Facebook Inc (NASDAQ:FB) overvalued or undervalued?

The Facebook Inc(NASDAQ:FB) stock is being relentlessly peddled to investors and investment managers by analysts and brokerages and this can be quite a worrying trend.

The share price of Facebook dropped to less than half the value at which it debuted on the stock exchanges, though it has rallied a bit since then.

However the question remains – are these recommendations being made justified? According to the Wall Street Journal this could be a problem.

“What some see as the relentless “buy, buy, buy” optimism has deepened scepticism about the Wall Street stock-pitching machine. Critics say Facebook is a telling example of the divided loyalties at many firms, which woo lucrative investment-banking clients and then prod brokerage customers to buy the same stocks even if they look bruised.”

The Journal has the view that the analysts’ recommendations are not really tenable and may be luring investors into wrong buying decisions.

Analysts, who have made the buy recommendations, have fixed a price target of $38 a share for the stock.

In their defence it can be said that they genuinely feel that the Facebook stock is undervalued and there is scope for the share price to rise.



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12 Responses to “Is Facebook Inc (NASDAQ:FB) overvalued or undervalued?”

  1. analyst are working for investors who put big money on the table.
    most times when analyst are recommending fb
    normally they bought at low prices and when analyst recommends you to a buy mode
    when you are buying mean while they (the big guys)are selling
    it happens all the time
    sheep always slaughter
    fb is overvalued big time
    and the figures they represent i don’t believe its true
    they are cooking the books.
    you are telling me they boosted the business by just cell phone advertising in the past 3 months?
    give me a break,
    sure it has impact on earnings but not as much as they stated in press release.

    Reply
  2. tim peterson January 2, 2013

    overvalued

    Reply
  3. 100% agree with Peter, the buy rating upgrades are their attempts at hedging the lost they have garnered from underwriting FB and buying into the hype at $38-$45 a share, if the shares don’t return to the “buy rating” they can’t possibly recover from this failed assessment.

    The ad model FB is an archaic way of marketing with no proof of direct return for the advertisers, further more the more FB attempts to undermine its users by way of policy changes or personal information selling will only further the damage to its brand and hampering the longevity of the social business.

    Once it stops being cool to be on FB, there is nothing they can do to fix it.
    The bottom line is FB will have to come up with a solid business model to justify these share prices.

    Reply
  4. Massively overpriced, I think some people are being fooled into letting the big investors claw some of their money back though misrepresentation of the actual figures.

    Facebook is nothing without it’s users and those users are flocking.

    Reply
  5. datarules January 2, 2013

    I disagree. UNDERVALUED. Cooking on the books is the wrong statement my friend. In order to understand the value of FB Inc. you have to know how Online Marketing, Web Tracking and User Data Mining (User Intelligence) is working and what the advantages are. FB knows exactly what their users are doing, how they are surfing and what they like and don’t like. Not only based on the information in the profile. Every website integrating FB’s Like Button is like a Check Point in the user’s customer journey. FB does not only know where you are surfing after you leave your profile, they also know how long your time lag is in days, hours, minutes and seconds until you come back to FB to stalk your ex girlfriend while FB is displaying the shoes, that you just checked out on another site, on your newsfeed with a voucher code only made for you receiving cash in return via a cpa (cost per acquisition) deal. FB is not only offering an unbelievably valuable asset in matters of user information with which they can earn billions of $ simply by offering exact target audiences for Ad Agencies that have billion $ budgets. FB will also be the world’s biggest market research tool in the future for any sector in any country in the world simply because of the statistical cases they can provide for any analysis.

    Quick example for you.

    Couple of months ago an online marketing analysts company stated that 150 million users are logging in daily into facebook and the percentage based on the total users is steadily increasing.

    Large companies are paying 20-30$ triple net after all discounts per thousand impressions for a “good” targeted ad campaign. That results in >3 Mio $ revenue per day at least. Adding that up you would have an appr 270 mio $ strong quarterly net revenue stream only for the adspace of users logging out.

    The ad space for facebook ist steadily increasing and the audience on facebook contains any user segment which is a pot of gold for every media ad agency in the world and even more for media planners at coca cola or mc donalds.

    Sooner or later FB will have a net income of banner ads and videos ads of more than 10 mio $ per day.

    Facebook is KING and data is its empire.

    Reply
  6. Ads means absolutely nothing without return. All you are saying is FB allows advertisers to justify spending millions on ‘targeted’ ads. What does ‘targeted’ ads have to do with revenue for advertisers when no one clicks on the ads, or impacted negatively due to these unrelated, distracting ‘targeted’ ads. To justify millions on a business model with no solid returns is a joke. There is not one friend I’ve spoken with that does not wish to know how to block every single ad on FB, not one cares whatever FB is trying to spoon feed you.

    Doesn’t matter what the advertisers think of the value of the mined data or the ability to target its demo, if those users don’t respond positively, it’s a waste and potentially annoy the very users that used to be fans of the brand.

    Reply
    • datarules January 3, 2013

      Paul, you are comparing apples and oranges. When you talk about annoying ads, they are mostly bad targeted so your hypothesis does not work. Do you have any idea how strong FB Ads are currently pushing e-commerce sales? We are talking about Display Ads here with an unbelievably high CTR (click through rate) and CR (conversion rate) in matters of purchases, if the ads are set up right. Comparing them to any other Display Network FB Ads are kicking a**. Apart from that they provide Organic Traffic in such an extent that they play a vital role in the users buying decision (multi channel funnel). This is not the right post to whinge about how annoying ads are. If FB does it right they will receive big money via ads in the future and the companies using that service will do to. The question of how users will respond to ads is always there, but you can’t use this argument in such a discussion, because its all assumptions.

      And please do not start with your friends in this topic, because a person’s circle of friends is always bas statistic sampling.

      Reply
  7. I agree with author, that is always scope to improve, and this is natural, especially with good team of FB.

    However, I would like to state different point here, which may slightly deviate from topic spoke coz user comments had already deviated it. FB First of all is popularizing a Very very very Wrong and a unhealthy trend. Quoting price 100 times the real worth. Though FB is not alone in this, but this doesn’t justify it as right. If we encourage, with future hope, when FB reaches 10 billion revenue may be miraculously, Fb will target 1000 billion dollor worth to be in same proportion,again with only future hopes and this logic sounds stupid. The point is the real worth, not what it is capable in unpredictable future when the past initiatives like instagram, messengers, and 200 other mobile apps failing miserably to generate revenue. Also mobile revenue is still tough and Only Hope remains at this point.

    If we encourage 100 times price difference with only unpredictable future as point, we can soon expect more followers in same way, and soon professional share market may become a very dirty place, which in turn may spoil economy big time.

    Reply
  8. user1567 January 7, 2013

    Ultimately, FB’s business is not growing nearly fast enough for the stock to be worth buying today. FB hype is just like the hype back at the peak of the dot-com days in 2000. Stay away for another 6 months to 1 year and then see if a good business model.

    Reply
  9. Porky Pig January 10, 2013

    Forget the company for the moment, look only at the stock price.

    FB will hit $33-$36 within the next 2 weeks. From there, it is likely to dip to $25-$28 which is a good buy.

    The stock will unlikely to hit $38 in Q1 of 2013

    Reply
  10. hassanchup January 11, 2013

    The underwriters either made big mistakes or intentionally misled all of us specially the small investors. What they say now about FB is suspect. Please do your own research.

    Reply
  11. bryan irving January 28, 2013

    Can anyone tell me what FB’s business is. I’ve been running ad campaigns on Google, Yahoo and Facebook for many years, paying the same amount for clicks. Google has produced a solid return, Yahoo has been productive but Facebook has yielded nothing. This says to me that people don’t buy on Facebook, they socialise. If they want to raise the value of their they need to charge for socialising. Or else they just have a bunch of shares that trade but have no basis in performance.

    Reply