It is the Superbowl of IPOs. After months of rampant speculation, the time to play the big game has finally arrived. While there is no debating the clout and dominance that Facebook (FB) enjoys in the fast-growing social media industry, there is anything but consensus when it comes to determining what the company's soon-to-be-listed shares will really be worth when they start trading on Friday.
The WSJ is reporting that Facebook just raised the price range of its stock offering to $34 to $38 a share (from $28 to $35), putting the company's valuation at $93 billion to $104 billion. But what will happen in the so-called aftermarket when the stock opens for trading is anybody's guess.
As the big day approaches, we brought together two analysts—with widely different outlooks over the next year—and hit them with some of the key challenges that Facebook will have to address. But no matter how well, or poorly, the company executes, most market watchers agree that putting a price tag on the business (which is headed up by 28-year-old billionaire Mark Zuckerberg) will be no ordinary event, simply because of the mass appeal and attention the deal is garnering amongst people who may have never thought of owning a stock before.
"I think the demand is going to be through the roof, and I expect the stock to trade up, regardless of what it is worth and regardless of where it prices," says analyst Michael Pachter, of Wedbush Securities, in the attached video. "This is the kind of stock where Grandma buys a share for little Johnny."
For Brian Wieser, analyst with Pivotal Research Group in Portland, OR, the opportunity to own Facebook may not be available on day one.
"The big concern that we have is not that it won't pop at the time of the IPO," he says, explaining that when so-called insiders of the company are allowed to sell shares after a three or six month lock-up period, that could cause the stock to ''come back closer to earth."
Of course, Facebook's user base of 901 million people (and counting) is at the core of all the excitement, but questions linger as to how many more people will open Facebook accounts that don't already have one.
For his part, Pachter sees another three years of growth until the pool reaches about 1.25 billion users. However, he's more interested in seeing that the number of minutes users spend on the site continues to rise, and says that's what advertisers care about, too.
Wieser, however, goes as far as to call monthly active users (MAUs) "a moot metric" and believes that the race for revenue is more relative than growth oriented. "As long as Facebook is delivering metrics that are as good or better than the alternatives, they'll be able to capture an increased share of the ad dollars spent," he explains.
The company itself recently warned investors in a federal disclosure filing that migrating its users to its mobile platform is not a sure thing and officially characterized it as a risk. Nonetheless, analysts like Pachter see this more as an opportunity with huge upside potential for ad rates.
For the record, Michael Pachter has an "Outperform" rating on Facebook and thinks the stock will go to $44 a share, while Brian Wieser does not have a rating on the stock but thinks it is worth $30 a share. Interestingly, this is the first time in their careers that either of these analysts have initiated coverage and written research reports on a company before it has listed, a fact that, in and of itself, speaks to the unprecedented excitement surrounding the Superbowl of IPO's.
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