Analysis says Facebook stocks are still too expensive

News and technology information Beijing time July 28, investment communications experts, MarketWatch columnist Herbert Mark Hulbert based on Facebook's latest earnings on the equity value of the unit reassessment, concluded that May to give the unit's 13.80 dollar fair value still apply.

The following is the full text of Herbert's commentary:

As compared with late May, it is clear that Facebook's share price is closer to $13.80 trillion.

It was then that I wrote that the real fair price for the company's shares would be 13.80 dollars. The article was written just a week after Facebook landed on the open market at a price of 38 dollars.

After the Thursday trading, when Facebook released its first earnings report as a listed company, the price of the shares had fallen below 24 dollars.

The reason why I want to reopen my fair-value assessment is because the new earnings report provides some new data to let me check if some of the assumptions I used to calculate were too radical or too conservative.

Those assumptions at the time included:

Revenue growth. I assumed that Facebook's revenue would grow from $3.71 billion trillion in 2011 to 11.58 billion dollars within five years. This assumption is based on research that found that all companies listed from 1996 to 2005 had an average revenue growth rate of 212% in the five years after the IPO.

Earnings。 At the time I assumed that Facebook's marketing rate would be in line with today's Google (GOOG), or about 5.51:1, within five years. Given that the revenue assumption is 11.58 billion dollars, that means Facebook will be worth 63.8 billion dollars in five years.

For the next five years, I assume that the average return on Facebook is 11%.

Needless to say, one of the key numbers we can verify from Facebook's earnings is revenue growth. Earnings showed that the company's second-quarter revenues were up 32.3% from a year earlier, and my estimate was that Facebook would have to achieve an average annual growth rate of 25.6% per cent for its revenue of $11.58 billion, and that the realistic figure was a little higher.

So I decided to base this slightly higher figure on the assumption that Facebook would keep it that way to see what the ultimate price of water was. As a result, I found that if that were the case, Facebook's fair value would now be 17.92 dollars, rather than the 13.80 dollars it had initially estimated.

In that case, the situation is much better than when I published the article in late May, but the good is very limited, because the price is about One-fourth lower than the current real price of the unit.

More to the point, I actually think it's too generous for Facebook because it's probably wrong to expect them to keep 32% growth over the next five years. Their revenues have been at a standstill in the past two quarters. In fact, if I were to calculate on the basis of the figures for the last two quarters, I would find that even the first 13.80 dollars were too generous.

In other words, I can't find any evidence from Facebook's latest earnings that the fair value of the 13.80 dollar that I set for the unit in May is necessary to change, even if Facebook's share price declines after earnings, and does not alter the nature of its price still too high.