Must-know: Is Facebook performing strongly versus its comps?

Market Realist

Investing in Facebook: A comprehensive primer and analysis (Part 9 of 9)

(Continued from Part 8)

Facebook’s performance

By using the average of Wall Street analysts’ consensus, we can see that Facebook (FB) is trading at 10x 2015 revenue and 17.4x 2015 EBITDA. Close competitor Twitter (TWTR) is trading at roughly 20x 2015 revenue and 102x 2015 EBITDA. Facebook’s other peers are trading at revenue multiples around 5x to 12x and EBITDA multiples from ~10x to 50x.

In the chart below, we can see that Facebook’s two-year estimated EBITDA growth rates seem to be moderate and almost in line with the company’s other peers—with the exception of Twitter. To understand more about Twitter’s hype, please see Why Twitter is like the cronut—in demand, but hyped and overvalued.

Social media stocks performed well last year, with the Global X Social Media Index ETF (SOCL) up 65% from January 2013. SOCL is designed to measure the performance of companies involved in the social media industry. Besides Facebook, Twitter, Zynga (ZNGA), and LinkedIn (LNKD), SOCL also includes Chinese Internet companies like Tencent and SINA. Some of these companies are expected to benefit this year on the back of growth in online video advertising and increased mobile penetration. The growth momentum is expected to continue, helping industry sales to increase 24%, according to consensus.

To learn more about social media stock performance, see Yelp fills in for Yellow Pages: The opportunity behind its success.

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