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Barron’s has a big feature on the Facebook IPO. Its conclusion: Skip it.The main concerns: Slowing revenue growth, and the shift to mobile.
Here’s the key part:
Despite all the excitement, investors would do well to skip the deal. Facebook’s shares will be richly priced, both in absolute terms and relative to the stocks of established growth companies Google (GOOG) and Apple (AAPL), as Barron’s argued in February when Facebook filed for its IPO (“At Long Last Facebook,” Feb. 6).
If the deal is priced at $35, Facebook will be valued at around 70 times projected 2012 earnings of 50 cents a share and 18 times estimated revenue of $5 billion.
In contrast, Google, at $610, trades for less than 15 times 2012 profit estimates and under six times revenue. At $570, Apple shares have a 2012 P/E of just 12 and the company’s sales have been growing more rapidly than Facebook’s despite a revenue base that is 40 times larger. The effective P/Es on Google and Apple are even lower when factoring in their huge cash hoards. Facebook also will have plenty of cash—an estimated $9 billion—after its IPO.
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