If Facebook (FB) Follows This Past IPO, It Could Be Only Upside from Here...
Tweet
Share
E-mail
Get Alerts FB Hot Sheet
Join SI Premium – FREE
Everyone has compared Facebook's (Nasdaq: FB) IPO to Google's (Nasdaq: GOOG) IPO, but there was another IPO years earlier that may also be worth looking at as a comparison: Amazon.com (Nasdaq: AMZN). There are clearly many differences between the two companies, but there are also some key similarities that investors considering a Facebook investment should investigate.
Amazon.com came public in 1997. It was a different time for the market. Stocks were red hot. Like houses at that time, stocks never seemed to go down. However, the Internet was still in its infant stage and no one really knew how to make money from it. Amazon's Jeff Bezos had this grand idea of selling books on the Internet. Many investors didn't know about Amazon, but the promise of selling books and other goods on the Internet was alluring.
In comparison, Facebook came public at a time when cautiousness reigned. Europe is blowing up, U.S. deficits are at record levels, QE from the Fed is the only life support for the markets, and we've been through the credit crisis/housing crash and dotcom bust over the past dozen years. Facebook was a much more "seasoned" company when it came public with real profits and revenue growth. However, as the market discovered before the IPO, the company is having trouble monetizing the shift to mobile usage. Unlike Amazon, everyone knew and used Facebook before the IPO -- 900 million of you.
Looking at the performance of the Amazon.com IPO: after underwriters priced the IPO at $18, shares closed 30 percent higher the first day at $23 1/2 (That's right 1/2 - we traded in fractions back then). Within weeks, however, shares of Amazon fell back near its IPO price. Then, oh then, it happened... Just ahead of Amazon's second-quarter results (the first as a public company) shares started ramping. By the July 10th second-quarter earnings date, shares had surged to $30.75 per share, or 71 percent above the IPO price. By the end of its first year as a public company shares had reached $60.25, or 235 percent above the IPO price.
The market gave Amazon.com a first-day valuation of $438 million, or 28x prior year's sales. This is the exact same as Facebook's first-day multiple on sales, albeit at a much higher valuation of $104 billion. However, Amazon went straight north on the first day IPO, while Facebook went straight south.
Here are Amazon.com's growth numbers its first three quarters and the first year as a public company:
Q2 - Net sales growth of 74 percent to $27.9M | Net loss of $0.31 per share, versus loss of $0.04 per share the prior year.
Q3 - Net sales growth of 36 percent to $37.9M | Net loss of $0.37 versus a loss of $0.12 the prior year
Q4 - Net sales growth of 74 percent to $66M | Net loss of $0.41 versus a loss of $0.12 the prior year.
FY 1997 - Net sales growth 838 percent to $147.8 million| Net loss of $1.27 versus a loss of $0.31 in prior year.
Here are Amazon.com's current expected growth numbers:
Q2 2012 - sales expected to grow 30 percent to $12.93 billion | EPS down 95 percent to $0.02
FY 2012 - sales expected to growth 32 percent to $63.38 billion | EPS down 13 percent to $1.19
Here are Facebook's expected growth numbers:
Q2 2012 - sales expected to grow 23 percent to $1.1 billion | EPS of $0.15
FY 2012 - sales expected to grow 29 percent to $4.8 billion | EPS of $0.55
Current Amazon.com valuation metrics:
1.5x forward sales estimates | 179x forward EPS estimates
Current Facebook valuation metrics:
18x forward sales estimates | 58x forward EPS estimates
Now Facebook and Amazon are too different companies, yet looking at the above data you can see the two are growing at similar rates. Despite this fact, the market is giving Amazon a much more aggressive valuation based on P/E.
If Facebook was given the same P/E multiple as Amazon, shares would be nearly $100 per share. Even with a less aggressive valuation of 100x, shares would be at $55.
Facebook will likely be reporting its second-quarter results sometime in mid-July. Looking back at the Amazon.com IPO, as noted above, shares jumped upon the debut, dropped to the IPO price shortly after, and then ramped ahead of second-quarter numbers. Looking at this pattern, smart investors might want to start stalking Facebook shares ahead of results as a similar pattern may play out.
Amazon.com came public in 1997. It was a different time for the market. Stocks were red hot. Like houses at that time, stocks never seemed to go down. However, the Internet was still in its infant stage and no one really knew how to make money from it. Amazon's Jeff Bezos had this grand idea of selling books on the Internet. Many investors didn't know about Amazon, but the promise of selling books and other goods on the Internet was alluring.
In comparison, Facebook came public at a time when cautiousness reigned. Europe is blowing up, U.S. deficits are at record levels, QE from the Fed is the only life support for the markets, and we've been through the credit crisis/housing crash and dotcom bust over the past dozen years. Facebook was a much more "seasoned" company when it came public with real profits and revenue growth. However, as the market discovered before the IPO, the company is having trouble monetizing the shift to mobile usage. Unlike Amazon, everyone knew and used Facebook before the IPO -- 900 million of you.
Looking at the performance of the Amazon.com IPO: after underwriters priced the IPO at $18, shares closed 30 percent higher the first day at $23 1/2 (That's right 1/2 - we traded in fractions back then). Within weeks, however, shares of Amazon fell back near its IPO price. Then, oh then, it happened... Just ahead of Amazon's second-quarter results (the first as a public company) shares started ramping. By the July 10th second-quarter earnings date, shares had surged to $30.75 per share, or 71 percent above the IPO price. By the end of its first year as a public company shares had reached $60.25, or 235 percent above the IPO price.
The market gave Amazon.com a first-day valuation of $438 million, or 28x prior year's sales. This is the exact same as Facebook's first-day multiple on sales, albeit at a much higher valuation of $104 billion. However, Amazon went straight north on the first day IPO, while Facebook went straight south.
Here are Amazon.com's growth numbers its first three quarters and the first year as a public company:
Q2 - Net sales growth of 74 percent to $27.9M | Net loss of $0.31 per share, versus loss of $0.04 per share the prior year.
Q3 - Net sales growth of 36 percent to $37.9M | Net loss of $0.37 versus a loss of $0.12 the prior year
Q4 - Net sales growth of 74 percent to $66M | Net loss of $0.41 versus a loss of $0.12 the prior year.
FY 1997 - Net sales growth 838 percent to $147.8 million| Net loss of $1.27 versus a loss of $0.31 in prior year.
Here are Amazon.com's current expected growth numbers:
Q2 2012 - sales expected to grow 30 percent to $12.93 billion | EPS down 95 percent to $0.02
FY 2012 - sales expected to growth 32 percent to $63.38 billion | EPS down 13 percent to $1.19
Here are Facebook's expected growth numbers:
Q2 2012 - sales expected to grow 23 percent to $1.1 billion | EPS of $0.15
FY 2012 - sales expected to grow 29 percent to $4.8 billion | EPS of $0.55
Current Amazon.com valuation metrics:
1.5x forward sales estimates | 179x forward EPS estimates
Current Facebook valuation metrics:
18x forward sales estimates | 58x forward EPS estimates
Now Facebook and Amazon are too different companies, yet looking at the above data you can see the two are growing at similar rates. Despite this fact, the market is giving Amazon a much more aggressive valuation based on P/E.
If Facebook was given the same P/E multiple as Amazon, shares would be nearly $100 per share. Even with a less aggressive valuation of 100x, shares would be at $55.
Facebook will likely be reporting its second-quarter results sometime in mid-July. Looking back at the Amazon.com IPO, as noted above, shares jumped upon the debut, dropped to the IPO price shortly after, and then ramped ahead of second-quarter numbers. Looking at this pattern, smart investors might want to start stalking Facebook shares ahead of results as a similar pattern may play out.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Bessent: U.S. will enforce 'zero leakage' approach to Iran sanctions
- SL Green Realty (SLG) PT Raised to $57 at Truist Securities
- Morgan Stanley sees quality stocks and AI adopters leading market
Create E-mail Alert Related Categories
Insiders' Blog, Trader TalkRelated Entities
Jeff Bezos, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
