Facebook fastest to hit US$250B, beating Google by six years
Facebook set an all-time high today, closing at $88.86 per share, valuing the company at just under $250 billion.
The giant social network’s 2.4 percent rise to a record close on Monday, a little more than three years after its IPO, made it the first company in the Standard & Poor’s 500 Index to break that market cap so quickly. According to Bloomberg, the previous record holder was Google Inc., which took about eight years.
Facebook’s quick rising may demonstrate investor confidence that the company will continue to grow mobile advertising sales on its application and others. To some degree, the increase also reflects froth in tech stocks; the Nasdaq Internet Index has almost doubled since Facebook went public.
“Its share trades at 87 times profit margin, almost five times the average in the S&P 500. Companies in the Nasdaq Internet Index trade at a price-earnings ratio of 27”.
“When you see stocks with these high multiples, it proves to you the market’s comfort in the longer term growth story,” said Paul Sweeney, an expert at Bloomberg Intelligence. “Investors think Facebook is more valuable than the average NASDAQ stock.”
The company’s rapid rise to $90.10 a share on Monday is even more perfect because the stock lost more than a large portion of its worth in the four months after its IPO in May 2012.
Facebook had a market value of $104.2 billion at its IPO, so the company didn’t have to climb in the same way as some other companies did to reach $250 billion.
With a market value of $253 billion, Facebook is currently the ninth-biggest company in the S&P 500 – bigger than Wal-Mart Stores Inc. and Procter & Gamble Co., which took decades to grow as valuable like Facebook.
Facebook’s income comes from advertising – which the company gets more than 90 percent of its revenues – increased 46 percent to $3.32 billion in the first quarter from a year earlier.
More than 66% of that originated from mobile advertisement sales. Analysts estimate that the Facebook business increased 37 percent in the second quarter, according to the information reported by Bloomberg.
Longer-term, the company plans to serve advertising on other applications and websites and to profit from its rapidly growing Instagram, WhatsApp and Messenger applications.
Facebook also is betting on its $2 billion buy of Oculus VR Inc a year ago, a “virtual-reality headset maker”, and plans to expand Internet connections in developing countries like Africa.