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Perhaps it's a bubble, but Facebook is used by an eighth of the people on the planet. Tell me that's not an asset. A single company has lots of information about and can display advertising to an eighth of the alive human race. Then again, so does Google, I suppose.
Its an asset but what is the value (in dollars and cents)?
Capital will ("should") flow to where it can be the most useful at producing wealth. This is just the market saying "I'd rather see what Facebook can do with X billion than Ford." Which on the face of it seems fair - Google had a similarly crazy PE when they floated. They grew into it pretty quickly though.
Investors don't invest because of curiosity. They want to earn money.
Ford's is a capital-intensive business. That's what gives it hard assets that make its market cap 70% of assets (btw, the author totally forgets the liability side of equation - equity investors aren't owed assets - they are owed (assets - liabilities) - look at big banks, they have trillions in assets - but they have equally enormous liabilities too).
Historically for internet based companies this metric on average has been very low especially when put in comparison with the auto industry.
Where Facebook will be in 5-10 years is just about anyone's guess.
Earlier quoted context omitted.
The OED doesn't know your social connections, your sexual orientation, your date of birth, your address, your previous address, your current location, your gender, your age, your interests, your employer, all the websites you've visited or even what you look like.
So, they have good information for advertising. And that's going to valuable, no doubt... ...but that's it. They aren't building a physical product, they're going to sell other people's products. Or, sell information so that other people can sell other people's products. I find it absurd that the market for web based adverting, between Google and Facebook and others, can be this valuable in the long run. These are ad…
You're talking like the answer to this question is obvious. People will keep cars for 10 years, and they're as likely as not to get them from Toyota instead. At this point, Facebook is probably making a little bit of money (indirectly from Ford advertising) from that car purchase. Not as much as Ford, sure, but Facebook extracts a little bit of revenue from many, many consumer transactions.
Enterprise value in billions = market capitalization + debt - cash
Ford’s enterprise value = 40.4 + 100.5 - 15.2 = $125.7 Billion
facebook’s enterprise value = 90 + 0 - 1.5 = $88.5 Billion
See here for a post I did on this article: http://hackerscapital.tumblr.com/
Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.
Earlier quoted context omitted.
The point is that even tho you are logging to facebook, you are not paying them as much as those buying fords.
But we know that the auto industry is cut throat and low-margin. Paying $30K for a Ford doesn't mean Ford just made $30K. Between manufacturing, R&D, marketing, and raw customer acquisition cost (dealerships aren't free), I'd be surprised if Ford walked away with 5% of that.
It is paying a twenty cent dividend on a stock price of about $10.
Cheap. Plus its making cars that are very competitive.
Ford IS more valuable that facebook. This guy's analysis is an apples to oranges comparison. Ford has $100.5 billion in debt and facebook has no debt - the companies should be compared based on enterprise value: Enterprise value in billions = market capitalization + debt - cash Ford’s enterprise value = 40.4 + 100.5 - 15.2 = $125.7 Billion facebook’s enterprise value = 90 + 0 - 1.5 = $88.5 Billion See here for a post…
EV should include debt at _market value_.
FB could just as easily issue debt in billions and I'd think that the market will be valuing it higher than that of Ford's for the same issue coupon (which just came back into the investment grade club after residing in the junk club for quite a while). FB would probably have a good income-to-interest coverage ratio if it ever issued debt so the discounting of its debt's cashflows would be less severe than that for Ford.
Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.
Could you please elaborate on this?
This doesn't happen if the raiding company can't put together enough money to make the purchase, or if not enough of the stock holders are willing to part with their shares.