MENU

NYU “Dean of Valuation” claims Facebook shares are a buy

Financial services news wire CNBC recently reported that, Aswath Damodaran, a New York University Stern Business School “professor of valuation” believes Facebook Inc. stock is good value under $180, with the stock closing at a US$171.16 overnight.

Professor Damodaran pointed to the fact that user numbers are still going up despite one of the “worst quarters” for PR a company could possibly have on the back of the Cambridge Analytica privacy scandal.

As a result some analysts and sceptics are concerned that user growth at Facebook will reverse in its key developed markets, with what users that remain spending less time on the social media platform.

Facebook also revealed falling profit margins for its quarter ended June 30, 2018 and warned investors to expect revenue growth to significantly slow in the quarters ahead, while it continues to invest in the necessary head count to counter problems associated with “fake news” and user privacy breaches.

As a result of the bad headlines, Facebook stock now trades on 24.5x annualised earnings per share of US$6.74, which looks good value in my opinion given its competitive position and underlying growth rates.

What’s more is that its photo sharing platform Instagram could get close to being as big as the Facebook platform one day, which means there’s still plenty of growth in the tank for Facebook yet.

Throw in the potential of WhatsApp, Messenger, marketplace andVR, among others, and it’s evident that Facebook still has a big future. Of course there are risks including slowing advertising revenues on the back of falling user numbers, but that’s one risk I feel is adequately compensated for in the existing valuation at US$171.16 per share.

Notably the professor of valuation also told CNBC that the Amazon Inc valuation “terrifies” him, but that investors should not bet against it. Sensible advice given Amazon stock has climbed 10 fold over just the past six years to hit a record high of US$2,050 overnight.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor Tom Richardson owns shares of Amazon and Facebook.

You can find Tom on Twitter @tommyr345

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors.  The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Facebook. The Motley Fool Australia has recommended Amazon and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!