A comparison of Google's (GOOG) market valuation and financial performance in its seventh year of operation [2005] to Facebook's in its seventh year of operation [2010].
In 2005 (roughly its seventh full year of operation), Google generated revenues of $ 6.14 billion and net income of $ 1.46 billion.
Google went public with an initial market valuation just under $ 30 billion in 2004 but within a year had a market value north of $ 100 billion. A valuation that seemed extreme but Google had no trouble quickly justifying.
That initial ~$ 30 billion valuation looks like a bargain today.
How does this compare to Facebook?
In 2010, according to this article, Facebook (also in its seventh year of operation) generated revenues of $ 2 billion and had net income of $ 400 million. Impressive. The growth rate is spectacular as Facebook's 2009 revenue was $ 777 million with $ 200 million of net income.
According to this, Goldman recently invested in Facebook at a $ 50 billion valuation. At that valuation, Facebook is being valued at 25x revenue and 125x earnings.
It's very hard to know what Facebook is/will be worth. We do know that, comparing both companies seventh year of operation apples to apples, Facebook is being given a valuation that is almost 2x that of Google while generating less than 1/3 as much revenue and net income.
Obviously, with Google now earning in two weeks what Facebook earns in a year there's a bit of a gap to close before you can consider these two in the same league financially.
Still, I wouldn't want to bet against Facebook.
...or Google.
I'll be surprised if both don't win big in very different ways.
Adam
Long position in GOOG
This site does not provide investing recommendations as that comes down to individual circumstances. Instead, it is for generalized informational, educational, and entertainment purposes. Visitors should always do their own research and consult, as needed, with a financial adviser that's familiar with the individual circumstances before making any investment decisions. Bottom line: The opinions found here should never be considered specific individualized investment advice and never a recommendation to buy or sell anything.
Long position in GOOG
This site does not provide investing recommendations as that comes down to individual circumstances. Instead, it is for generalized informational, educational, and entertainment purposes. Visitors should always do their own research and consult, as needed, with a financial adviser that's familiar with the individual circumstances before making any investment decisions. Bottom line: The opinions found here should never be considered specific individualized investment advice and never a recommendation to buy or sell anything.
