Facebook Hits $50
Editor's note: A previous version of this article stated China would be unblocking Facebook. The Fool regrets the error.
Facebook shares opened at $50 this morning, clearing another meaty milestone that didn't seem possible when the once-busted IPO was trading in the high teens late last year.
It seemed as if it would take years for Facebook to reclaim its IPO price of $38. Well, it only took months, and now folks who seemed to have bought losing lottery tickets when they got in on the IPO are sitting on 32% gains. To put that in perspective, the S&P 500 has only climbed 30% higher in that time.
Facebook's latest step up came on the heels of a Goldman Sachs update, revising its price target on the leading social networking website operator from $52 to $58. An encouraging vibe from the company during its AdWeek 2013 presentation and an equally enthusiastic advertiser response find Goldman Sachs analyst Heather Bellini feeling confident on her bullish call despite the stock hitting new all-time highs this week.
This was already shaping up to be a good week for Facebook.
When Facebook went public last year, it was at an unrealistic valuation, given both the advertising uncertainties and the pesky arrival of Google with its Google+ platform.
Questions about Facebook's monetization of mobile usage that held the shares back last year are no longer being asked. The validated dot-com darling knows what it's doing. Analysts see revenue growing 44% this year and another 32% next year, and a major part of those models is Facebook's ability to gain traction as it introduces new marketing platforms to cash in on its growing audience.
Valuation hounds will argue that the stock has gotten ahead of itself -- fetching a steep 52 times next year's projected earnings -- but the stock never belonged in the teens, where it bottomed out back in November.
The valuations are rich in social media, and that comes with the territory. If you think Facebook is toting a lofty multiple, check out LinkedIn at 115 times next year's earnings. Yes, the career-oriented social networking specialist is growing faster than Facebook, but it just goes to show that folks are paying up for the right market leaders.
Google is trading at a more reasonable 17 times next year's earnings, but it's naturally not growing as quickly as Facebook or LinkedIn. We also don't have a clear picture on how the search engine giant will eventually monetize the Google+ traffic. That's not a mystery with LinkedIn. Attracting white-collar professionals opens up the market for companies seeking employees and professional recruiters. It's also a going to be a more affluent audience to market aspirational and big-ticket products to. All three companies can excel in their areas, and Facebook's new high only proves how hot social media is these days.
What a convenient time for Twitter to go public, right?
Between the buzz building for Twitter's upcoming IPO that's renewing interest in social media investments and Facebook silencing the critics with every passing quarter, it's not really a surprise that Facebook finds itself hitting new highs again. We can't dismiss the Google+ threat just yet, but it's clear that there's room for several growing giants that are doing things right in social media.
Facebook's in the right place at the right time, and that's a far cry from where it was in May of last year when its IPO came at a bad time.
Facebook is in a big war with four other tech giants
The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to rule the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!
The article Facebook Hits $50 originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.