News that Facebook is considering an IPO that puts the valuation of the company at between $75B to $100B has every one commenting on the story. We looked at this as well with an added twist - what are the other tech companies worth if we assume the same ratios as Facebook. www.analytixinsight.com

1. Facebook’s Current ‘Perceived’ Valuation
(a comparison)
Analysis as of 02/02/2012
www.analytixinsight.com
1

2. Earnings Multiples
• Facebook's $1 billion of earnings in 2011 comes from a 65% YOY growth.
– Earnings growth appears to be slowing down; Q4 growth less than Q1.
• Google has a 17x P/E on 2011 earnings. Apple’s trading at 13x.
– With Google and Apple’s P/E multiples, Facebook’s worth $13-17 billion.
• But Facebook is growing faster than either one and so should likely trade at a
higher P/E multiple. Assume Facebook should trade at a PE multiple that is
about 2.5x Google's PE and about 4x Apple's, i.e. 40-50x.
– At 40-50x P/E on 2011’s earnings, Facebook value is $40-50 billion.
• If Facebook's earnings grow at the same rate as they did last year (i.e. a
generous 65%, given the apparent slowing down), Facebook will earn ~$1.65
billion in 2012.
– Using the same 40-50x P/E multiple on 2012 earnings ($1.65 billion),
Facebook would be worth $65-80 billion based on next year's earnings.
www.analytixinsight.com 2

3. Revenue Multiples
• For a different take, consider Facebook's revenue multiple and compare
against Apple, Google as well as other fast growing internet companies.
• Apple's trading at 4x 2011 revenue. Google's trading at 5x revenue. Zynga,
LinkedIn, etc. trade around 15x revenue.
– Facebook is growing faster than Google and Apple but slower than
LinkedIn.
• Assume a 10-12x revenue multiple.
– The valuation range is $40-50 billion based on last year's revenue.
– Looking forward, you'd get $75-$90 billion based on a generous
DOUBLING of 2011’s revenue (i.e. 2012 revenue of ~$7.5 billion).
• CONCLUSION: Hard to see how Facebook’s intrinsic value is not
around $40-50 billion. Very generous assumptions about 2012’s
financials project a value of $70-80 billion. Certainly not $100 billion!
www.analytixinsight.com 3

4. Put Differently…
• If we applied Facebook’s perceived multiples to Apple and Google
• Facebook’s $75-100 billion valuation number being thrown around
translates to a 45-60x of next year’s earnings ($1.65 billion).
• Given their ‘slower’ growth, assume Apple and Google trade at HALF of
Facebook’s multiples (say 20-30x P/E).
• Given current consensus earnings estimates for
both, they both should trade around $850-1250 per
share today!
www.analytixinsight.com 4

5. Disclaimer
The information presented in this report has been obtained from sources deemed to be
reliable, but AnalytixInsight does not make any representation about the accuracy,
completeness, or timeliness of this information. This report was produced by AnalytixInsight for
informational purposes only and nothing contained herein should be construed as an offer to
buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument.
This report is current only as of the date that it was published and the opinions, estimates,
ratings and other information may change without notice or publication. Past performance is no
guarantee of future results. Prior to making an investment or other financial decision, please
consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any
party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain
a position, or make a market in any security referred to herein. One of the principal tenets for
us at AnalytixInsight is that the best person to handle your finances is you. By your use of our
services or by reading any our reports, you're agreeing that you bear responsibility for your own
investment research and investment decisions. You also agree that AnalytixInsight, its
directors, its employees, and its agents will not be liable for any investment decision made or
action taken by you and others based on news, information, opinion, or any other material
generated by us and/or published through our services. For a complete disclaimer, please visit
us at www.analytixinsight.com .
www.analytixinsight.com 5