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  • jjmacauley jjmacauley Nov 22, 2012 12:54 PM Flag

    GOOG has 45% growth, FB has 25% growth, GOOG has 50 Billion revenue, FB has 4 Billion Both depends

    I'm not sure I accept the proposition that the "Value" of these two companies is solely predicated on the relationship that exists between "Share Count" and "Expected Revenues". In fact, I can think of a number of other metrics that should be considered in arriving at a "Fair Market Price"...as I'm sure you can. But, let's say I accept the "Algorhythm" used by you to arrive at your price conclusion. The problem with your analysis....is the Data. 2013 GOOG revenue is projected to be $52 Bill. FB Rev = $6.45 Bill. GOOG has 330 Mill Shrs outstanding. FB has 2.2 Bill. Therefore......Rev/Shares for GOOG = $157. FB Rev/Shr = $2.93. Applying your Algorythm.... FB should be priced at 1.86% ($2.93 / $157) of GOOG $666 market value..... or $12.38. However, the projected 5 year growth rate you quoted for GOOG is not 45%.....its 13.45%. The projected growth rate for FB = 26.95%....double that of GOOG. So, applying your logic.....if $666 is a fair price for GOOG....given its growth rate....then $24.76 would be a Fair Market Price for FB. Current FB price....$24.32. That said.....do you think GOOG is overvalued or undervalued? Because if you believe...as analysts do...... that GOOG should be $800....or 20% higher than its current price....then using your logic.....and your "Relative Pricing Model"....a Target Price of $30 for FB....is also completely reasonable. Those are my thoughts. BTW: thank you for taking the time to submit your analysis. Your comments forced me to take a look at the FB opportunity through a different lense. And, I'm glad that I did. Happy Thanksgiving.

    Sentiment: Buy

 
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