To say Facebook (FB) shares got off to a rocky start would be a grotesque understatement. Facebook had quite simply the worst debut since the post dot-com days. For investors, getting an allocation of the IPO for $38 a share went from a longtime dream to a nightmare. From those lofty highs, FB shares dropped to under $18 by September of last year.
Those who made it through the pain finally saw their faith rewarded in late July when FB justified their love by blasting past even the most bullish of expectations. It wasn't until July 31 that FB poked its head over $38, and it has tacked on another 10% from there and is currently sitting over $41, making the company worth more than $100 billion.
Regardless of the huge gains in mobile advertising in the second quarter, there are serious doubts in terms of whether or not FB is really worth 50% more than eBay (EBAY). Michael Cuggino of the Permanent Portfolio Family of Funds is one of the believers.
Facebook is "accumulating a tremendous intangible asset, and that is information," Cuggino says in the attached video. "They're going to be able to monetize that." Though he cautions against fits and starts along the way, Cuggino thinks the second quarter was merely the opening salvo in a coming bombardment of earnings beats.
FB is trading at nearly 15 times trailing 12-month revenue. That seems crazy at first blush, but the company grew revenues by that much last quarter. The future is promised to no one, but it seems doubtful in the extreme to think that Facebook has run out of ways to monetize mobile users already. The user base doesn't need to expand that rapidly; all Facebook needs to do is crack the code on profiting from the transition from desktop to mobile. In that sense, the company's greatest strategic weakness (migration to mobile) has become the best reason to believe.
The biggest question facing Facebook is whether or not big money has gotten behind the company. From that perspective, nothing gets analysts as excited as beating estimates. As long as Facebook wins new advocates on Wall Street, the shares are going to be "worth" much more than $100 billion for the foreseeable future.
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