It seems like just yesterday that Facebook Inc went public, now its market value has topped US$250 billion.
The social network company’s 2.4 percent climb to a record close on Monday made it the first company in the Standard & Poor’s (S&P) 500 Index to breach that market cap so quickly. The previous record holder was Google Inc, which took about eight years.
Facebook’s rapid ascent might indicate investor confidence that the company would continue to increase mobile-advertising sales on its application and others. To some degree, the gain also reflects froth in technology stocks; the NASDAQ Internet Index has almost doubled since Facebook went public.
Its shares trade at 87 times earnings, 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 shows you the market’s comfort in the longer-term growth story,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “Investors think Facebook is more valuable than the average NASDAQ stock.”
The company’s quick rise to US$90.10 a share on Monday is even more remarkable because the stock lost more than half its value in the four months after its initial public offering (IPO) in May 2012. Facebook had a market value of US$104.2 billion at its IPO, so the company did not have to climb as far as some other companies did to reach US$250 billion.
With a market value of US$253 billion, Facebook is now the ninth-biggest company in the S&P 500 — bigger than Wal-Mart Stores Inc and Procter & Gamble Co, which took decades to grow to be so valuable.
Facebook’s revenue from advertising — from which the company gets more than 90 percent of its sales — increased 46 percent to US$3.32 billion in the first quarter from a year earlier. More than two-thirds of that came from mobile ad sales. Analysts estimate that sales rose 37 percent in the second quarter.
Longer-term, the company plans to serve ads on other applications and Web sites, and to make money from its rapidly growing Instagram, WhatsApp and Messenger apps.
Facebook also is betting on its US$2 billion purchase last year of Oculus VR Inc, a virtual reality headset maker, and efforts to expand Internet connections in developing nations.
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