At the closing bell on Friday, Facebook edged up to just over $77/share, putting its market cap at some $200 billion. It’s an incredible run-up, clocking a nearly 90% gain in one year. I think Facebook’s success, at least on a stock market level, is due to a few things:
1. Obvious exuberance in the stock market, particularly within the tech sector. Whether this exuberance is warranted, I’m not sure. Janet Yellen thinks it isn’t.
2. Facebook is okay unbundling its services from the “big blue” app. Between Instagram, WhatsApp, and now, Messenger, Facebook is working hard to ensure it stays relevant, even if traditional social media doesn’t.
3. Facebook “gets” two important messages:
a. Mobile monetization.
b. That messaging is where it’s at. SnapChat’s $10 billion valuation lends credence – however, perhaps, inflated – that messaging is the critical frontier for social media. Now, Facebook’s $19 billion acquisition of WhatsApp seems a little less spendy.
It’s an imperfect game to play, but it’s worth noting that Facebook’s market cap is greater than that of Amazon ($160 billion), despite Amazon’s stratospheric 910 P/E.
Disclaimer: I hold shares of Facebook, but have only enough for me to remain interested in the stock, and not enough to bias my writing. If I held more shares, well, then we could talk.
Silicon Spatula 