Facebook IPO: is Facebook overvalued?
http://www.nma.tv<br /><br />Facebook plans to raise US$5 billion in an IPO that could value the company at US$100 billion. The eight-year-old company founded by Mark Zuckerberg could raise as much as US$10 billion with follow-on offerings.<br /><br />A market cap of US$100 billion would make Facebook one of the most valuable companies in the world, on par with McDonald's.<br /><br />The company sells highly targeted ads based on user-provided information. This helped Facebook earn US$1 billion last year on US$3.7 billion in revenue. By comparison, Google pulled in US$38 billion in sales and US$10 billion in earnings.<br /><br />But on a price-to-sales basis, the market thinks Facebook is worth more. Does this mean the market thinks Facebook will win the internet? <br /><br />Analysts expect Facebook's advertising revenue will grow just 52% to $5.8 billion this year and only 21% to $7 billion in 2013. That is still far behind Google.<br /><br />What's more, Facebook is increasingly popular on mobile devices but doesn't display ads on phones and its capability to do so remains unproven.<br /><br />Sales from virtual goods in games aren't much help either. Virtual goods produced just 12% of Facebook's revenue last year.