Lots of FB posts last 24 hours, but hardly any real discussion; lots of anecdotes and emotional testimonies.
Here is an updated FB DCF and PE model I provided earlier this year ... Listened to the conference call twice, re-read the Q2 earnings slides and have updated every relevant item I can think of (and with, what i'd like to believe, a lean towards conservatism).
One post recently suggested waiting until $140 to enter. Let's give some perspective to that price target ... using my model, the inputs that would lead to a $140 price would suggest -3.5% terminal growth and an 11.0% discount rate.
Absolutely not even close to reality. FB has a current WACC of 8.3%, and using a terminal growth rate of < 0.00% seems borderline mentally retarded given Zuck's history of purchasing growth (ie. IG purchase for $1B)
I have a $302 price target for 2022. Given today's close, that is about 14-15% CAGR over the next 4 years. Not going to make anyone filthy rich, but still a very likely setup to deliver alpha for years to come.
Also, consider this: FB earnings yield rose to 3.70% as of today's close (a company still growing somewhere between 20-30% YoY). The US 10-year is hovering around 3.00% .... think about that for a few minutes and ask yourself what "relative value" means to you
Submitted July 27, 2018 at 12:09AM by gghh01 https://ift.tt/2OfXuUN
