Facebook (FB) and Twitter (TWTR) are to of the largest social networking site in the world with both sites ranking in the top 11 most visited sites in the world. Both companies have integrated there websites into the very fabric of the web. Opening there platforms for other to build on and allowing them to leverage both companies massive social data. Both companies have massive social data on all of use which is very valuable for potential advertisers.
Facebook Inc. (FB)
Was founded by Mark Zuckerberg and his Harvard roommates as an online college directory. The spread to other Ivy League Colleges throughout the United States Once Facebook was open to high school students the site grew like a wild fire spreading all over the U.S. and then abroad. Today Facebook has over 1 billion active users with 900 million of them on mobile devices. Since placing ads on the site revenues have grown rapidly and massively. But Facebook generally has lower clickthrough rates then other major websites. Facebook has an average clickthrough rate of 0.04%, but on brand and product pages has report clickthrough rate as high as 6%. After 11 years Facebook finally went public in 2012 at 104 billion dollars, but it went horribly wrong. There share price spent most of 2012 and 2013 in the trash so to speak. Right after going public Facebook acquired Instagram a two year photo sharing app that had no profit or revenue at $1 billion dollars. Two years later Facebook acquired WhatsApp for $19 billion dollars. Facebook will pay $4 billion in cash, $12 billion in Facebook shares and $3 billion in restricted stock units for WhatsApp founders and employees that will be vested over the next 4 years.
Facebook Valuation and Ratios
| Price to Earnings (P/E) | 117.24 |
| Price to Book (P/B) | 11.64 |
| Price to Sales (P/S) | 22.95 |
| Profit Margin | 19.06% |
| Operating Margins | 37.11% |
| Return on Equity | 11.02% |
| Return on Assets | 11.07% |
Facebook had for 2013 revenues of $7.87 billion, annual profits of $1.5 billion, earnings per share of 60 cents and user growth of 3.4%. The company trade at 117 times its earnings but if it sold at the same P/E as the NASDAQ its share price would trade at about $13 dollars per share. It is very clear that Facebook is massively overvalued and doesn't reflect reality at all. People are paying up for the potential that growth will somehow reach the current valuation for Facebook.
Twitter Inc. (TWTR)
Was founded by Jack Dorsey, Evan Williams, Biz Stone and Noah Glass in 2006. Twitter is a social network and micro blogging service. It enables users to sent Tweets, which are text messages that have a 140 character limit. Since going live in mid 2006 the service has have explosive growth spread all over the country and the world. Twitters service has had massive effect on the culture of the U.S. and the rest of the world. Its platform has been use by people from the middle east to other areas of the world to organize uprising and start revolutions. These uprisings and revolutions have been dubbed the Twitter Revolution, which has lead many countries to censor the site or even band it. After six years Twitter went public in 2013 and its market cap was valued at 34 billion dollars after the first day of trading.
Twitter Valuation and Ratios
| Price to Earnings (P/E) | 264.29 |
| Price to Book (P/B) | 9.89 |
| Price to Sales (P/S) | 47.37 |
| Profit Margin | -97.06% |
| Operating Margin | -95.69% |
| Return on Equity | ?? |
| Return on Assets | ?? |
Twitter average ad rates declined by 18% in Q4 2013, down 81% since Q1 2012. Its had Q4 revenues of $243 million but the company report an $3.41 earning per share loss and user growth of 3.8%. The company full year revenues was $665 million and a full year loss of $1.41 earnings per share. Twitter stock trades at 265 times its no essence earnings. I can not value Twitter that has no earnings. It sell at unbelievably unrealistic multiplies that are not based in reality.
Compared Valuation of Facebook and Twitter
Facebook had full year revenues of $7.87 billion and Twitter had $665 million. Facebook had earnings per share of 60 cents why'll Twitter had a loss of $1.41 per share. Both companies are overvalued Facebook trades at 117 times earning and Twitter trades at 264 times earnings.
Facebook and Twitter Statistic on Users, and Ratios
| Ratios and User Statistics | ||
| Market Cap. | 134 billion | 29 billion |
| Price to Earnings (P/E) | 117.24 | 264.29 |
| Price to Book (P/B) | 11.64 | 9.89 |
| Price to Sales (P/S) | 22.95 | 47.37 |
| Profit Margins | 19.06% | -97.06% |
| Operating Margins | 37.11% | -95.69% |
| Q4 User Growth | 3.4% | 3.8% |
| Mobile Advertisements Market Share | 15.8% | 1.9% |
| Average Time on The site | 22:52 min. | 12:51 min. |
Facebook and Twitter valuations today are massively out of whack and not in reality. I have nothing really to value Facebook with, but worse I have nothing at all to value Twitter. It make no since for these companies to sell at the multiplies they are trading at. People are hoping, praying, and falsely believing that these companies will grow in to these valuations. Both companies could double there earnings and revenues for the next 50 years and wouldn't even come anywhere close to there current valuations of 134 billion and 29 billion. People are be unrealistic with the current valuations that they have place on these companies, which can never live up to these valuations. If you are buy these companies shares or on t.v preaching the wonders and growth potential of these companies you are a Speculator. Facebook and Twitter are not investment but Speculations and no intelligent investor should go near these companies no matter what that dumb ass Jim Cramer says.
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