Renren (RENN) May be a Value Compared with Facebook
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Renren (Nasdaq: RENN), considered the Facebook of China, had a great IPO debut Wednesday, however if you look at the company compared to its U.S. counterpart, it appears to be trading at a steep discount.
Facebook is reportedly worth $50 billion, making each one of its 500 million users worth roughly $100.
Renren has 117 million users and a market cap of $7 billion, suggesting a value per user of approximately $60. If you tag a value of $100 per user for Renren, the stock could be worth $11.7 billion, or about $30 per share – roughly 67% higher than Wednesday’s close of $18.01.
Renren's value may look even more reasonable as some recent reports peg Facebook's valuation between $70-$100 billion.
With a stronghold in the U.S., it could easily be argued Facebook users are worth more simply because of their per capita income. Still, considering growth opportunities, Renren could conceivably grow faster than Facebook and one day actually surpass Facebook in users.
Looking at user activity, Renren is no slouch. Renren said from January 2011 through March 2011, unique log-in users spent a monthly average of approximately seven hours on the company's platform, and users collectively produced a daily average of approximately 40 million pieces of user-generated content, including approximately three million photos and 13 million status updates. Facebook said its users spend over 700 billion minutes per month on the site.
While Renren may be a valued cheaply compared to Facebook, investors need to ask if Facebook is really worth as much as it has been recently valued. Also, will either company be able to make consistent profits? These questions will be answered in the years ahead. Average investors can now place their bets on Renren, and in the next year or so Facebook is expected to go public. When the public market is allowed to value Facebook, Renren investors may have a better comparison.
Disclosure: Long RENN
Facebook is reportedly worth $50 billion, making each one of its 500 million users worth roughly $100.
Renren has 117 million users and a market cap of $7 billion, suggesting a value per user of approximately $60. If you tag a value of $100 per user for Renren, the stock could be worth $11.7 billion, or about $30 per share – roughly 67% higher than Wednesday’s close of $18.01.
Renren's value may look even more reasonable as some recent reports peg Facebook's valuation between $70-$100 billion.
With a stronghold in the U.S., it could easily be argued Facebook users are worth more simply because of their per capita income. Still, considering growth opportunities, Renren could conceivably grow faster than Facebook and one day actually surpass Facebook in users.
Looking at user activity, Renren is no slouch. Renren said from January 2011 through March 2011, unique log-in users spent a monthly average of approximately seven hours on the company's platform, and users collectively produced a daily average of approximately 40 million pieces of user-generated content, including approximately three million photos and 13 million status updates. Facebook said its users spend over 700 billion minutes per month on the site.
While Renren may be a valued cheaply compared to Facebook, investors need to ask if Facebook is really worth as much as it has been recently valued. Also, will either company be able to make consistent profits? These questions will be answered in the years ahead. Average investors can now place their bets on Renren, and in the next year or so Facebook is expected to go public. When the public market is allowed to value Facebook, Renren investors may have a better comparison.
Disclosure: Long RENN
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