Here's What Facebook's Stock Has To Do To Make Mark Zuckerberg The World's Richest Man

Mark zuckerberg facebookREUTERS/Robert GalbraithFacebook CEO Mark Zuckerberg walks through Facebook headquarters prior to unveiling the company’s new location services feature called ‘Places’ at a news conference in Palo Alto, California August 18, 2010.

We doubt this is Mark Zuckerberg’s goal in life, but if he wanted to be the richest man in the world Facebook’s stock has to go to $US200.

We got that number from Bloomberg wealth reporter David de Jong on Twitter. He says at $US200 Zuckerberg would overtake Bill Gates as the world’s richest person — assuming all things stay the same as they are now. (De Jong was responding to a tweet from NYT columnist Farhad Manjoo.)

Facebook’s stock is trading at $US76.20 this morning, so it needs to almost triple. Facebook’s current market cap is $US195.4 billion. If the stock went to $US200, Facebook would be worth over $US500 billion. For some comparison, Apple is currently valued at $US580 billion.

Could Facebook do it? Can it reach $US500+ billion?

When Apple broke through the $US500 billion barrier, it was doing ~$33 billion in annual profit which was a 15X price to earnings ratio. That’s roughly in line with market as a whole over time.

Price to earnings (P/E) is approximately how much an investor has to pay for $US1 of earnings. It’s a way to compare the value of stocks to each other.

However, the better comparison for Facebook might be Google, which is a software/internet company. Apple is viewed as a hardware company, so it has a tougher P/E ratio. With a $US401 billion market cap, Google has a P/E of 31, and earnings of ~$13 billion.

Facebook currently has a P/E of 98, and its trailing 12-month profits are $US1.91 billion.

If we use Google as a comparison, and Facebook’s P/E eventually contracts to 31, then net income has to reach ~$16.1 billion, an ~8X increase from where it’s at today. If we use Apple/the market then Facebook has to get its net income to $US33 billion, which is 16X where it’s at today.

Could Facebook get there? Certainly!

Facebook has only scratched the surface of its potential. The core business’ revenue is still growing at 61% on a year-over-year basis. It’s sitting on Instagram, which could be another advertising juggernaut, and it then there’s WhatsApp and Facebook messages. Plus there’s Oculus and who knows what else Facebook can think of.

So, while it may not be his goal in life, Mark Zuckerberg can very conceivably become the richest man in the world.

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